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Should Netflix Be More Like Walt Disney?

Key Points

  • Netflix is opening Netflix Houses in select U.S. cities, which will bring its popular shows and movies to life.

  • Disney is second-to-none when it comes to physical experiences, a segment that rakes in substantial profits.

  • Netflix dominates the current media landscape, so a major shift in strategy isn’t necessary.

In the past decade, Netflix (NASDAQ: NFLX) shares have soared 955%. Just this year (as of July 23), they are up 32%. With this type of stellar performance, it seems the business can do no wrong.

However, there is one area Netflix has yet to tap: Theme parks. The company has become a dominant media and entertainment enterprise, but it's presence in the physical world is nonexistent.

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This puts Netflix behind a peer like Walt Disney (NYSE: DIS), which owns and operates seven of the 10 most visited theme parks on the face of the planet. Not to mention the cruise ships that Disney also has. Maybe Netflix is staring at an obvious opportunity here to grow its revenue and fan base.

Should the top streaming stock become more like the House of Mouse? Here's how investors should view this situation from a strategic and financial perspective.

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Image source: Getty Images.

Creating a flywheel

Disney has unmatched intellectual property (IP), which helps support its flywheel. People might watch a new Marvel movie or series and immediately want to experience these characters in real life, so they visit Walt Disney World to ride the Guardians of the Galaxy: Cosmic Rewind roller coaster. They might also buy merchandise. It's a situation where all the pieces fortify Disney's competitive position, allowing it to develop deeper and longer-lasting connections with its fans.

Creating physical experiences can help Netflix bolster its brand in the same way. For what it's worth, the company plans to launch Netflix Houses in Dallas and Philadelphia this year, and in Las Vegas in 2027. These are permanent, but small-format (about 100,000 square feet) setups located in shopping malls. There are interactive experiences, dining options, and retail stores.

It's encouraging to see Netflix test the waters when it comes to physical experiences. It might not have the breadth and depth of IP that Disney has, especially when it comes to content for kids and families, but it has extremely popular shows and movies that people love. It's probably best that Netflix isn't going full steam ahead with building an actual theme park, as it likely won't be able to compete with Disney's dominance, or with Comcast's Universal Studios.

Financial implications

When making these kinds of strategic decisions, what matters most is the potential they can have for financial success. Disney's Experiences segment is its most profitable. In fiscal 2024 (ended Sept. 28, 2024), this division raked in $9.3 billion in operating income on $34.2 billion in revenue.

Netflix reported $6.9 billion in free cash flow in 2024, with a forecast to bring in between $8 billion and $8.5 billion this year. Investing in building out theme parks would require huge capital expenditure commitments that would certainly dent Netflix's strong financial position. Return on invested capital is a key metric that management teams should think about when allocating cash to its best use. Developing physical experiences at Disney's level would take resources away from creating top-notch content that the company is known for.

In September 2023, Disney announced that it was going to spend $60 billion over the next decade to expand its Experiences segment. That's a massive undertaking that Netflix can avoid.

Netflix is doing just fine

The media industry, which is now being driven by the streaming model, is extremely competitive. There are many businesses vying for viewer attention, so it's always important to figure out ways of standing out. But Netflix reigns supreme, with more than 300 million subscribers worldwide. It's operating from a position of strength with the upcoming launch of Netflix Houses.

Netflix doesn't need to be more like Disney. The former continues to fire on all cylinders. The opposite argument holds more weight, with Disney needing to be more like Netflix -- at least when it comes to the House of Mouse's streaming segment that just became profitable not too long ago.

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Netflix Lifts Forecast on Ad Surge

Netflix(NASDAQ:NFLX) reported Q2 2025 earnings on July 17, 2025, with updated full-year revenue guidance of $44.8–$45.2 billion (midpoint up $1 billion from prior), and a raised operating margin target of 30%. Management highlighted accelerating member growth, robust ad sales momentum—on pace to double ad revenue this year—and continued strategic investments in original content and technology.

Margin Expansion, Revenue Acceleration, and Ad Growth Boost Full-Year Outlook

The revised full-year guidance reflects both beneficial foreign exchange (FX) movements and underlying business strength, lifting mid-point revenue projections by approximately $1 billion.

Management cited 'healthy member growth,' with ad sales on pace to roughly double in 2025, while operating expenses remain steady, driving the operating margin target up to 30% for the full year and the FX-neutral margin up by 50 basis points for 2025. The revised reported operating margin guidance now exceeds the prior range, indicating improving leverage amid accelerating revenue growth.

"So we are largely flowing through the expected higher revenues to profit margins. So that is why our updated target full-year reported margin is up a point from 29% to 30% and that 50 basis point increase in FX neutral margin is really just that revenue lift from stronger membership growth and ads relative to prior forecast flowing through the margin."
— Spencer Neumann, CFO

Higher-than-expected recurring revenue, particularly from membership and advertising, is translating into higher profit margins, strengthening the fundamental long-term earnings profile.

Global Ad Tech Rollout Unlocks Programmatic Growth and Monetization Channels

The April completion of the proprietary ad technology (ad tech) stack rollout now covers all of Netflix’s global ad markets, with subsequent data signaling a seamless transition and measurable increases in programmatic ad buying.

The company highlighted material enhancements to advertiser accessibility and targeting capabilities, imminent feature releases, and the addition of new demand sources such as Yahoo—all contributing to forward momentum in advertising as a revenue driver.

"We have completed the rollout of our own ad tech stack and the Netflix ad suite to all of our ad markets now…We have seen an increased programmatic buying. […] We are also […] going to roll out additional demand sources like Yahoo that will further open up the market for us."
— Greg Peters, Co-CEO

Owning the global ad tech infrastructure compresses go-to-market cycles and improves data-based product differentiation.

Diversified Franchise and Content Flywheel Drives Sustainable, International Engagement

The second half content slate is weighted toward globally resonant franchises, with 44 Emmy-nominated shows, new seasons of flagship series like "Squid Game," "Wednesday," "Stranger Things," and "Bridgerton," and major film releases including "Happy Gilmore 2" and a new "Knives Out."

The pipeline extends across original, licensed, animated, and live event formats—including growing international productions and sport-adjacent live rights. Notably, the company referenced ongoing member demand for increased content variety, exemplified by the TF1 partnership in France, aiming to better address local tastes in key territories.

"So what it is is about a steady drumbeat of shows and films and soon enough games that our members really love and continue to expect from us. So, like, by way of example, we had 44 individual shows nominated for Emmys this year. So that is what quality at scale looks like."
— Ted Sarandos, Co-CEO

Sustained investment in a diverse, regionally tailored slate—backed by expanding production capability and cross-format extensions—solidifies Netflix’s competitive moat, supporting global sub growth, engagement retention, and pricing power irrespective of single-title "hit" volatility.

Looking Ahead

Management projects 2025 full-year reported revenues of $44.8–$45.2 billion and an operating margin of 30%, with a third-quarter forecasted margin of 31.5%. Advertising revenue is on pace to roughly double, and the company anticipates increased engagement in the second half of 2025 due to a strong content slate.

No specific quantitative forward guidance for gaming or M&A was issued; Netflix confirmed an ongoing focus on organic growth, continued shareholder returns via repurchases, and accelerated content and technology investments.

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This article was created using Large Language Models (LLMs) based on The Motley Fool's insights and investing approach. It has been reviewed by our AI quality control systems. Since LLMs cannot (currently) own stocks, it has no positions in any of the stocks mentioned. The Motley Fool has positions in and recommends Netflix. The Motley Fool has a disclosure policy.

Netflix: Strong Sales and Wider Margins

Key Points

  • In the second quarter, Netflix reported 16% year-over-year revenue growth and beat bottom-line expectations.

  • Operating margins improved significantly, fueled by the company's higher plan pricing.

  • Forward guidance looks strong on revenue, but just OK on profitability.

Here's our initial take on Netflix's (NASDAQ: NFLX) fiscal 2025 second-quarter financial report.

Key Metrics

Metric Q2 2024 Q2 2025 Change vs. Expectations
Revenue $9.56 billion $11.08 billion 16% Beat
EPS $4.88 $7.19 47% Beat
Free cash flow $1.21 billion $2.27 billion 87% n/a
Shares outstanding 439.7 million 434.9 million -1% n/a

Netflix Turns In a Solid Performance

Wall Street had high expectations for Netflix heading into its second-quarter report, especially after a significant earnings beat in the first quarter. Analysts were expecting a 15% year-over-year increase in revenue and 45% EPS growth.

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Although expectations were lofty, Netflix managed to beat on both the top and bottom lines. Operating margin expanded by 7 percentage points compared to the same period last year, and free cash flow increased by an impressive 87%.

Most of the growth is coming from Netflix's higher prices, as the company increased its membership plan costs in January. Also in the report, Netflix mentioned that the rollout of the Netflix Ads Suite, its proprietary ad tech platform, has been completed. Management says that it expects to roughly double ads revenue in 2025, but it is likely to become a more significant part of the company's top line in 2026 and beyond. Revenue growth was strong in all of the company's regions, especially in the Asia-Pacific region, where revenue increased 24% year over year.

During the second quarter, Netflix spent $1.6 billion on share buybacks, and still had $8.2 billion in cash on the balance sheet.

Looking ahead, Netflix expects 17.3% year-over-year revenue growth in the third quarter, although management expects operating margin to decline significantly. As management said, "Similar to past years, we expect our operating margin in the second half of 2025 will be lower than the first half due to higher content amortization and sales and marketing costs associated with our larger second half slate." The company increased its full-year revenue guidance by $1 billion at the midpoint of the range.

Immediate Market Reaction

Netflix stock was trading slightly lower after hours, but not by much. As of 4:15 p.m. ET, Netflix shares were trading about 1% lower. Although the quarter looked strong and revenue guidance was raised, shareholders may have profitability concerns for the second half of the year. It's worth noting that this reaction was before management's earnings call, which is scheduled for later in the afternoon.

What to Watch

As mentioned, Netflix's ad platform was recently completed, so any insights on ad revenue in the third and fourth quarters of the year will be important to watch.

In addition, Netflix has some highly anticipated content set to be released in the second half of the year, such as the final season of Stranger Things and Happy Gilmore 2 and the live Canelo-Crawford boxing match, so it will be interesting to see if that boosts new subscribers.

Helpful Resources

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Netflix (NFLX) Q2 2025 Earnings Call Transcript

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Image source: The Motley Fool.

DATE

Thursday, July 17, 2025 at 4:45 p.m. ET

CALL PARTICIPANTS

Co-CEO — Ted Sarandos

Co-CEO — Greg Peters

Chief Financial Officer — Spencer Neumann

Vice President, Finance, Investor Relations, and Corporate Development — Spencer Wang

Need a quote from one of our analysts? Email [email protected]

TAKEAWAYS

Full-Year Revenue Guidance: Raised full-year revenue guidance to $44.8 billion–$45.2 billion, representing a midpoint increase of approximately $1 billion over the prior forecast, primarily due to foreign exchange effects and stronger-than-expected member growth.

Operating Margin: Full-year reported operating margin target increased to 30%, up from 29% previously; FX-neutral margin is now guided to 29.5% for the year, reflecting improved underlying membership growth and advertising performance.

Advertising Revenue: On track to roughly double for the year; Ad sales momentum is "a bit ahead of beginning-of-year expectations," with a global ad tech stack now fully rolled out.

Ad Tech Deployment: Greg Peters said, "We have completed the rollout of our own ad tech stack and the Netflix, Inc. ad suite to all of our ad markets now." enabling faster feature releases and improved ad targeting and measurement.

Consumer Metrics: Retention remains "stable and industry-leading," with no significant changes in plan mix, take rate, or engagement; recent price changes performed in line with expectations.

Content Spend: Content amortization is projected to exceed $16 billion this year. It has grown more than 50% from under $11 billion in 2020 to over $16 billion this year, supporting a broader and deeper content slate.

Engagement: Total view hours grew modestly in the first half of 2025, as reported by Greg Peters; per-owner-household engagement has been "relatively steady over the past two and a half years" despite competitive pressure.

Product Innovations: New user interface has been deployed to the first large wave of TV devices and is showing "performance that is better than what we saw in our prelaunch testing," improving content discovery and session metrics.

TF1 Partnership: Announced a partnership with France's TF1 to expand local content offerings, leveraging existing investments in live, advertising, and the new user interface to enhance local market relevance.

Gaming Initiatives: Further investment in games, highlighted by positive early impact from Grand Theft Auto and other licensed titles in 2025; emphasis remains on scaling value to members and retention rather than short-term monetization.

AI Adoption: Successful integration of generative AI in production enabled completion of VFX sequences "10 times faster" and at lower cost, as seen in an Argentine original series; this marked the first GenAI final footage to appear on screen in a Netflix original series or film.

Shareholder Returns and Capital Deployment: Continued preference for organic growth and returning excess capital via share repurchase, with management reaffirming a selective, disciplined approach to potential M&A opportunities.

SUMMARY

Netflix, Inc. (NASDAQ:NFLX) management emphasized an upgraded full-year 2025 revenue outlook of $44.8 to $45.2 billion and improved reported operating margin guidance from 29% to 30%, driven by favorable FX trends and accelerating member and ads business growth. The company completed the global rollout of its proprietary ad tech stack, enabling rapid feature innovation and positioning ad revenue to roughly double this year. Stable retention and engagement trends, combined with significant investment in original content and technology, were highlighted as key to future growth. Management announced the TF1 partnership to further enhance local content breadth in France and maintained a disciplined investment approach across new categories such as games and generative AI initiatives.

Ted Sarandos described new content releases and renewals, including international roles for successful franchises, as central to driving engagement, stating, "it is not about the single hit. So what it is is about a steady drumbeat of shows and films and soon enough games that our members really love"

Greg Peters disclosed, "We have seen an increased programmatic buying." from advertisers following the full ad suite rollout, with upcoming integration of additional demand sources like Yahoo to further expand the business.

Management provided the first confirmation that generative AI-powered final footage debuted in a Netflix original this year, demonstrating operational efficiencies in production scalability and speed.

Ted Sarandos confirmed live events and sports remain a "relatively small part of the total content spend" but acknowledged their outsized positive impact on acquisition metrics and a likely impact on retention.

Spencer Neumann reiterated, "we have historically been more builders than buyers," reaffirming organic growth and cash return as the principal capital allocation priorities despite anticipated media sector consolidation.

INDUSTRY GLOSSARY

Ad Tech Stack: The platform and infrastructure enabling programmatic delivery, targeting, and measurement of advertising inventory across Netflix's services.

TF1: A leading French television broadcaster with whom Netflix announced a localized content partnership.

Generative AI (GenAI): Artificial intelligence technologies used to automate or enhance creative tasks such as visual effects, content personalization, or recommendation systems.

Programmatic Buying: Automated, data-driven purchasing of digital advertising inventory.

Owner Household: A measurement unit excluding shared/borrowed accounts, used by Netflix to assess engagement per paying household.

Amortization (Content Amort): The systematic expense recognition of content production costs over time as titles are distributed and consumed.

iLine: Netflix's internal production innovation group, focused on visual effects and technical advances in entertainment content creation.

Full Conference Call Transcript

Spencer Wang: Good afternoon, and welcome to the Netflix, Inc. Q2 2025 earnings interview. I am Spencer Wang, VP of Finance, IR, and Corporate Development. Joining me today are Co-CEOs, Ted Sarandos and Greg Peters, and CFO, Spencer Neumann. As a reminder, we will be making forward-looking statements, and actual results may vary. We will take questions submitted by the analyst community, and we will begin with our results and our forecast. The first question comes from Steve Cahall of Wells Fargo. The question is, since the revenue increase in your forecast is primarily FX driven, we are curious about the components of the constant currency increase.

Is this due to a better underlying revenue growth, or are there specific expenses that are coming in better, like content amortization? I will take that one. Thanks, Steve. So I

Spencer Neumann: As you saw on the letter, we increased our full-year revenue guidance to $44.8 to $45.2 billion. That is up from the prior guide of $43.5 to $44.5 billion. So up about a billion at the midpoint of the range and a tighter range. As you noted, primarily reflects the FX impact from the weakening dollar relative to most other currencies. But the good news is we are also seeing strength in our underlying business. We have got healthy member growth, and that even picked up nicely at the '2 a bit more than we expected. We think that will carry through with our strong back half slate. So we are reflecting that in our latest forecast.

We are also seeing nice momentum in ad sales, still off a pretty small base, but good growth and it is on pace to roughly double our revenue in the year. And it is a bit ahead of beginning of year expectations. So when we carry all that through to operating margin, our operating expenses are essentially unchanged, which is part of your question. So they are basically unchanged forecast to forecast. So we are largely flowing through the expected higher revenues to profit margins.

So that is why our updated target full-year reported margin is up a point from 29% to 30% and that 50 basis point increase in FX neutral margin is really just that revenue lift from stronger membership growth and ads relative to prior forecast flowing through the margin.

Spencer Wang: Thank you, Spence. We will take our next question from Barton Crockett of Rosenblatt Securities. Why is operating margin guidance for the full year only 30% after the upside in February and a forecast 31.5% for the third quarter? Is there a timing issue, FX issue, or is there a new level of spending that will continue beyond the fourth quarter of 2025?

Spencer Neumann: Well, this is really mostly timing. So thanks, Barton. We primarily, as a reminder, manage to full-year margins. And we expect our content expenses will ramp in Q3 and Q4. We have got many of our biggest new and returning titles and live events in the back half of the year. We have also, you know, Q4 is typically a and generally almost always is a heavier film slate. Sure. We will talk about our expect we will talk about more of this on the call. Also be marketing to support that heavier slate, and we are continuing to aggressively build out our ad sales infrastructure and capabilities through the year. So all of that is to be expected.

We can manage to it. We manage to those margins. And even with that back half ramp in expenses, we expect operating margins to be up year over year in each quarter, including Q4, and as just noted, we do expect to deliver strong full-year margins as we just took up our guide to, you know, 29.5% FX neutral, 30% reported.

Spencer Wang: Great. Thanks, Spence. The next question comes from Tom Champion of Piper Sandler. How has your view of the consumer and the macro economy changed over the last ninety days?

Spencer Neumann: Similar to last quarter, we are carefully watching consumer sentiment in the broader

Greg Peters: economy. But at this point, really nothing significant to note in the metrics and the indicators that we get directly through the business. Those are retention that remains stable and industry-leading. There have been no significant shifts in plan mix or plan take rate. And the price changes we have done since the last quarter have been in line with expectations. Engagement also remains healthy. So things all look stable from those indicators and big picture entertainment in general and Netflix, Inc. specific have been historically pretty resilient in tougher economic times.

We also think that we are an incredible entertainment value not only compared to traditional entertainment, but if you think about streaming competitors, when we start at $7.99 in The United States, you think about all the entertainment you get we have a belief and expectation that demand for not only entertainment but for us specifically will remain strong.

Spencer Wang: Thanks, Greg. I think a nice follow-up to this question will be on advertising. So from Ben Swinburne of Morgan Stanley, can you share any data points around your upfront negotiations?

Greg Peters: Yep. As we noted in the letter, our US upfront is nearly complete. We have closed a large majority of deals with the major agencies. Those results have generally been in line or slightly better than our targets and consistent with our goal to roughly double the ads business this year. And what are advertisers excited about? Growing scale is something we definitely hear. Also, a highly engaged audience. So bigger audience, but also an audience that is more engaged relative to our peers. The rollout of our own ad tech stack, which helps deliver a bunch of features, and then our slate, which is generally amazing and includes a growing number of live events that advertisers are excited about.

Spencer Wang: Great. Follow-up question on advertising from Vikram of Baird. How have advertisers in The US responded to the Netflix, Inc. ads suite rollout since the April launch? What features and capabilities are attracting the most interest, and how is the initial feedback in other regions outside of The US?

Greg Peters: We have completed the rollout of our own ad tech stack and the Netflix, Inc. ad suite to all of our ad markets now. So we are fully on our own stack around the world at this point. That rollout was generally smooth across all countries. We see good performance metrics across all countries, and the early results are in line with our expectations. Now we are in this phase of learning and improving quickly based on the fact that being live everywhere means that you get a bunch of feedback about what we can do better, which is great.

As we mentioned before, the most immediate benefit from this rollout is just making it easier for advertisers to buy on Netflix, Inc. We hear that benefit, that ease, from direct feedback talking to advertisers. They tell us that it is easier. See it in our overall sales performance. We have seen an increased programmatic buying. So all of these are consistent, you know, with what we were expecting both qualitatively and from a metrics perspective. We are also, I guess, worth noting that we are going to roll out additional demand sources like Yahoo that will further open up the market for us.

Long term, being on our own stack, that improves the speed of our execution to deliver this, you know, pretty significant roadmap of features that we have in front of us. It is things like improved targeting and measurement. There is also leveraging advertiser and third-party data which we definitely hear demand for as well. And it will ultimately allow us to improve the ad experience for our members. Which is critically important. So that means better ads personalization. So the ads that I see are increasingly different from the ads that, let us say, Ted would see.

And they are more relevant for each of us, which is good for us as users, and it is good for the brands. Also going to be introducing interactivity in the second half of the year, so that is exciting. So that is all to say this is, you know, a pretty significant milestone for us, one we are super excited to get behind us because now we can shift into this steady release cycle where we are dropping new features all the time, both for advertisers and for members. And that is the development and release that we have in other parts of the business. So it is fun to be able to get to that point.

Spencer Wang: Thanks, Greg. I will move this along now to a set of questions around content as engagement. This one comes from Ben Swinburne of Morgan Stanley. 1% engagement growth year over year suggests engagement is down year over year on an average per member basis. How do we reconcile that with engagement growing on a per member household basis if that is still accurate?

Greg Peters: So total view hours did grow a bit in the first half of 2025, and that is despite a particularly back half-weighted slate. But to your point on engagement on a per member basis, we have mostly been focused for the last few years on measuring engagement on what we call an owner household basis. So this takes out the borrower effect, and we obviously think this is the best way to assess our engagement per member because it removes the tricky comparison impacts from paid sharing.

So that metric per owner household engagement has been relatively steady over the past two and a half years throughout the rollout of paid sharing, and amidst increasing competition for TV time as more viewing moves to streaming and gets this on-demand benefit. So we are glad to have held that normalized engagement level, but we clearly also want to increase it. And to that end, we are optimistic and expect that our engagement growth in the second half of this year will be better than in the first half given our strong second half slate.

Spencer Wang: Thanks, Greg. Great segue to Doug Inmuth's question from JPMorgan. The content in the back half of the year looks strong with Squid Game 3 already the third most popular non-English series ever, and Wednesday and Stranger Things releasing in the coming months. You often say that no single title drives more than 1% of total viewing. So how do you think about the business currently as being quote, hit boosted or hit driven, and are you confident that both original and licensed content momentum can continue in 2026?

Ted Sarandos: Yeah. I will take that. And thank you, Doug. On the first part of your question, we are definitely riding this long-term trend of linear to streaming. And that has a natural adoption curve. But we can accelerate our growth with big hits. But as you said, each one of them, even in success, is going to drive about 1% of total viewing. So you need a lot more than just a big hit every once in a while. So to your point, it is not about the single hit. So what it is about a steady drumbeat of shows and films and soon enough games that our members really love and continue to expect from us.

So, like, by way of example, we had 44 individual shows nominated for Emmys this year. So that is what quality at scale looks like. We ended the quarter with a huge return to Squid Game. Thanks for acknowledging. I will go into the second half with the return of Wednesday and Stranger Things. And a really strong slate of supporting titles and favorites, like and new shows. Like next week or this week, we have Eric Bonnett's Untamed. Next week, we have Leanne Morgan's new comedy show Leanne. Both look really great. And that is just to name a few.

And the back half of the year also has perhaps the most anticipated slate of new movies that we have ever had. That starts on the 25th with Happy Gilmore 2, followed by we have a new Knives Out film. We have new films from Noah Baumbach, from Guillermo del Toro, from Catherine Bigelow. And it does not stop there. It does roll right into 2026, and that is the second part of your question. And we are looking forward to movies like the rip from Ben Affleck and Matt Damon. Shirley starred on a new movie called Apex, which is a phenomenal action movie. Millie Bobby Brown is back in Enola Holmes 3.

Recall that in 2023, Enola Holmes 2 was our biggest movie. So we are looking forward to that new sequel.

Spencer Wang: And Greta Gerwig's Narnia is going to be phenomenal.

Ted Sarandos: And then on top of that, we talk about Return of Bridgerton, One Piece, Avatar: The Last Airbender, all three huge successes around the world. The Gentleman, Four Seasons, Point Break, I am sorry, Running Points. Sorry. Beef, which as you recall in 2023, won just about every award imaginable and was a gigantic success for us. It is back for a new season in '26. Three Body Problem, Love is Blind, Outer Banks, and not just from The US, from France, we have LuPan. From Spain, we have Berlin. We have a new season of a hundred years of from Colombia. So big hit returning shows and new series. From each of our regions around the world.

And the new stuff we have got coming up like man on fire, reimagining of little house on the prairie, The Duffer brothers from Stranger Things have a brand new show. The Burrows. We have got the Human Vapor from Japan. Operation Safred Cigar from India, can this love be translated from Korea? So again, popular programming, new and returning from all over the world in 2026. Unscripted shows like the reboot of Star Search, we have got into the doll universe. With Wonka's golden ticket, which we are really excited about.

In our live, we have got a few surprises for you next year, but of course, we have our NFL Christmas Day doubleheader that we are really thrilled about too. So we are really incredibly excited about the back half of this year and confident that it keeps rolling in 26.

Spencer Wang: Thank you, Ted. We will take the next question from Rich Greenfield of LightShed Partners. Who asks, are you concerned by the stagnation in your viewing share domestically?

Spencer Neumann: Think Rich is probably referring to the Nielsen gauge data. Do you need to spend more on programming or spend differently to materially move your viewing share higher?

Ted Sarandos: Yeah. Thanks, Rich. Look, our goal continues to be to continue to grow our share over the long term. And over the past few years, you are right, we have been able to maintain our share even as we work through a growing number of TV-based streaming services, some free, some paid. And the impact of paid sharing that Greg mentioned earlier as well as this, you know, 2025 slate that was more back half-weighted than we typically have in previous years. But over the long term, we tend to keep growing as the other 50% of TV viewing migrates from linear to streaming. And we will do that by doing what we have always done, continuously improve the service.

So in mind, since 2020, our content amort has grown more than 50%. You know, from under $11 billion to more than $16 billion. That we expect to do this year. And over that same time period, we definitely had we saw a big increased spending, but also increased engagement. Increased revenue, increased profit, and increased profit margin. So that is our model in action.

It is our objective to sustain healthy revenue growth, reinvest in the business to improve on all aspects of the service, and that includes growing content spend, strengthening expanding the entertainment offering, and to drive that positive flywheel of growth by adding value to our members and all the while growing engagement revenue and profit around the world.

Spencer Wang: Great. Thank you, Ted. I will move to Alan Gould from Loop Capital next. Can you provide more information on the TF1 partnership? Why did you choose to add TF1 in France as opposed to other broadcasters as your first partner, why is now the right time to create such a partner? Should we anticipate similar partnerships in other countries?

Greg Peters: Yeah. Perhaps to start with the rationale for the partnership. You would think with that long list of amazing titles that Ted just rattled off, we would have enough to satisfy every person on the planet. But it turns out we actually consistently hear from our members that they want more. They want more variety, more breadth of content. So the fundamental purpose for this TF1 partnership is all about that goal. Of expanding our entertainment offering. How do we enhance the value we deliver to members? Want to provide more content, more variety, more quality. So just as you have seen us do with licensing and production, this is just another mechanism to expand that offering.

And in this case, it is specifically about highly relevant local for local content in a country that has strong demand for that local content. This is an accelerated way to satisfy that need. Why now? Why was this time the right time? Well, we have invested a lot in a bunch of enabling capabilities that are either required or highly leveraged by this deal. You can think live, ads, the new UI, among other things. And then why TF1 versus some other partner? Well, we know each other really well. We wanted our first partner to be in a big territory. We wanted to pick the leading local programmer.

We wanted to be highly aligned in terms of the deal and the shape of the partnership and the values that we thought we could generate mutually by working together for our customers. And we both look at this as an opportunity to learn, to figure out how do we scale the local content that TF1 is producing to more customers in France. So we are looking forward to seeing what consumers think. You never really know until you get out there and get the real reactions. And then, obviously, we will factor that into our plans going forward.

Ted Sarandos: Thanks, Greg.

Spencer Wang: From Robert Fishman of MoffettNathanson, with reports suggesting Apple is now in the driver's seat for F1 rights. Uh-huh. Unintended, I guess. Plus UFC and MLB still looking for new deals and the NFL may be looking to come to market a year earlier. Can you share updated thoughts on how you are approaching sports rights for Netflix, Inc. and where you draw the line on something that can move the needle?

Ted Sarandos: Wow. Thanks for that, Robert. Remember, sports are a subcomponent of our live strategy. But our live strategy goes beyond sports alone. Our live strategy and our sports strategy are unchanged. You know, we remain focused on ownable big breakthrough events that because our audiences really love them. Anything we chase in the event space or in the sports space has got to make economic sense as well. You know, we bring a lot to the table, the deals that we make have to reflect that. So live is a relatively small part of the total content spend. And we have got about 200 billion view hours.

So it is a pretty small part of view hours as well right now. That being said, not all view hours are equal. And what we have seen with live is it has outsized positive impacts around conversation, around acquisition, and we suspect around retention. And but so right now, we are very excited where we sit. Very excited with the existing strategy. We are excited about the Canela Crawford fight and September and the SAG Awards and our weekly WWE matches. And the NFL, of course, which is a great property, and we are happy to have Christmas Day doubleheader, which includes Dallas versus Washington. And Detroit versus Minnesota.

So today, our live events have all primarily been in The US, keep in mind. So over time, we are going to continue to invest and grow our live capabilities for events around the world in the years ahead. So we are excited, but the strategy is unchanged.

Spencer Wang: Thanks, Ted. Good follow-up question on that one from Steve Cahall of Wells Fargo. What investments have you made to increase your capabilities in producing live events? What have you been able to do in-house in 2025 that you could not do last year? And how long will it take before you have the capability to produce large-scale events like NFL games?

Ted Sarandos: Yeah. Thanks, Steve. I would say remember, when we started original scripted programming, we had zero production capability. House of Cards was in fact thinking about our first three years of original programming, all of those shows were produced by others. Have to go three years later, we have produced Stranger Things in-house. Today, we still have shows that are produced by others. Universal, Twentieth Television, which is Disney, Paramount, Lionsgate, Warner Television, there is lots of available infrastructure to produce TV. And that is true of live events and sports as well. If we when we do more and more, we may choose to bring some of that in-house.

We have already produced a few, and we are just as likely to continue to use partners with existing production infrastructure and work to make sure that those productions are bespoke and they feel like they could only be on Netflix, Inc. So you should not think about the mix of partnerships and self-producing as a we think about it as a scaling tool. Not backfilling some, like, lack of ability in some area of the company. So and I should note by example, CBS is a phenomenal partner producing NFL games with us, and we are thrilled to work with them again this year on Christmas Day.

Greg Peters: Maybe take this opportunity just to some commentary on the general capability we have been building with live. Know, when we start something new, we pretty much expect that we are not going to be brilliant at it at the beginning. What? But we yeah. That is true. And we do not have any real reason to believe that. But we do not let that stop us from kicking off initiatives that we believe have a strong strategic rationale even though we know we need to develop that capability. Of course, our job is to get out there and learn by doing and get world-class as quickly as we possibly can.

And if you look at our current capabilities around live, we are in just a completely different place today compared to when we first started. As a good example that just happened last Friday, we had our first concurrent pair of live events. We had Taylor versus Serrano globally delivered alongside WWE SmackDown, was delivered ex-US. Both events at scale and delivered with extremely high quality. So it is great progress we have seen, and we have got a great roadmap ahead of us to continue to enhance those experiences. For folks.

Spencer Wang: Thank you both. Last question on the content side or the topic of content comes from Ben Swinburne of Morgan Stanley. What are the learnings from the success of K-Pop Demon Hunters? More animated musicals with fictional bands, question mark. That is a question from a man who probably has that movie playing on repeat in their home if I am guessing correctly. K-Pop Demon Hunters is a phenomenal success out of the gate. One of the things that I am really proud of the team over

Ted Sarandos: is original animation, not sequel, not live-action remake. Original animation feature is very tough and has been struggling for years. And I think the fact that our biggest hits now, Leo, Seabeast, and now K-Pop Demon Hunters, are original animation. So we are super thrilled about that. The mix of music and pop culture, getting it right matters. Good storytelling matters. The innovation in animation itself matters. And the fact that people are in love with this film and in love with the music from this film that will keep it going for a long time. So we are really thrilled. And now the next beat is where does it go from here?

So know, we put in the letter how just how successful the music has been. And continues to be, and we think that will drive fandom for this fictional K-Pop band that we have. But more importantly, for the song Golden and for the song Soda Pop, these are enormous hits, and they all came from a film that is available only on Netflix, Inc. So we are really excited that we can pierce the culture with original animated features considering that folks have been poking us on it.

Spencer Neumann: Let us do it again later in the year within your dreams. Right, Ted? Absolutely. In your dreams, another very

Ted Sarandos: funny one and also completely original. So Yeah.

Spencer Wang: Great. I will move us on now to a few questions on plans as well as product. So from Michael Morris of Guggenheim, he asks, Netflix, Inc. continues to broaden content genres notably with live sports and the recently announced TF1 partnership. Is there a path to additional tiers of service based on types of content available, or will Netflix, Inc. always make all content available at the ad-free/ad-supported price points?

Greg Peters: I have learned to never say never, so I would say we remain open to evolving our consumer-facing model. Think we have got a few principles, important principles that we are carrying with us that I do not see changing significantly. One is we want to provide members choice. Right? So how do we have a different set of plans, a different price points, different features that allows folks to opt in to what is the right Netflix, Inc. for them. Also, how do we provide good accessibility to new members around the world? We want to grow, and that means making that we have got accessible price points.

And then finally, the plans we offer, they have to know, ensure that we are having reasonable returns to the business based on the entertainment value that we deliver, and we are hoping to grow those and so those returns would grow as well. Now obviously, the reason to do that is we can continue to reinvest in adding more entertainment and building a better experience. And maybe one other thought too is there is a component of complex in ChoiceDax that we have to consider in how we think about our offering. It is structured. So having said all that, though, I think we believe that the bundle is a great value for members.

It allows members around the world to access a wide range of entertainment in a very easy way at a very reasonable price. So I would expect that will remain an important feature of our offering for the foreseeable future.

Ted Sarandos: A lot of value and simplicity.

Spencer Neumann: Yeah.

Spencer Wang: Great. From Rich Greenfield of LightShed Partners, help us understand why your new UI/UX is so important as you expand live content. Beyond live, can you provide some color on what metrics have improved since the launch of the new UI, such as speed of users finding a title and change in failed sessions.

Greg Peters: As we said previously, it is really hard for a new UI to immediately compete, be better than the UI that we have had for the past ten years that has been iteratively evolved and improved. But now that we have actually rolled out this new UI to the first large wave of TV devices, we are actually seeing performance that is better than what we saw in our prelaunch testing. To some degree, that is expected because we made some improvements based on the results of that testing phase. So it is exciting to see that those delivered actual better results.

But the rate of that change actually gives us increased confidence that this new experience will drive better performance, by the variety of metrics we look at some of which include the ones that Rich is mentioning in relatively short order. And then maybe just a point on why are why do we build this and launch this new experience the first place? Why was this so important? Bluntly, the previous experience was designed for the Netflix, Inc. of ten years ago, and the business has involved considerably since then. We got a wider breadth of entertainment options. We got TV and film, more of those, of course, from around the world, but now also games and live events.

If you think about the discovery experience that is best suited for these new content types, it is inherently different. Helping our members understand that there is a really good reason for them to launch Netflix, Inc. and tune in at 7PM on a Friday night versus just showing up whenever they were free and wanted to be entertained. That is a totally different job, and we really need a different user interface to do that job well. Add to that, we saw the opportunity to leverage newer technologies, like real-time recommendations that respond dynamically to what you need from us in that specific moment.

So the Netflix, Inc. you get on a Tuesday night is different from the Netflix, Inc. you get on a Sunday afternoon. But all of those rationales together and what we are seeing in terms of the performance so far, we are very confident that we have got a much better platform in this new user experience to build from to continue to improve, and that will help us meet the needs of the business over the years to come.

Spencer Wang: Thanks, Greg. The next question comes from Steve Cahall of Wells Fargo. YouTube is the only streamer that exceeds Netflix, Inc. in terms of US share of TV time. Do you see an opportunity to bring notable YouTube creators and their content exclusively to Netflix, Inc.? How big could this opportunity be?

Ted Sarandos: Thanks, Steve. Look. We want to be in business with the best creatives on the planet. Regardless of where they come from. Some of them are here in Hollywood. Others are Korea, some are in India. And some are creators that distribute only on social media platforms, and most of them have not yet been discovered. So, for those creators doing great work, we have phenomenal distribution. Desirable monetization, brilliant discovery in our UI, and a hungry audience waiting to be entertained. So Steve, you recently I think I listened to you on a podcast where you talked about our business model and on this I believe on this very topic.

And we largely agree with you and believe that working with a wide set of content creators makes a lot of sense for us. And as you said, if I am remembering it right, not everything on YouTube will fit on Netflix, Inc. We could not agree with that more. But there are some creators on YouTube like Miss Rachel that are a great fit. If you could saw on the engagement report, she said 53 million views in 2025 on Netflix, Inc. So she clearly works on Netflix, Inc. And we are really excited about the Sidemen and pop the balloon and a wide variety of and video podcasters that might be a good fit for us.

And particularly if they are doing great work and looking for different ways to connect with audiences.

Greg Peters: And maybe broadening this out for a second, and taking that question to look at sort of all of the competitors. That we face for our share of TV time. We have always said that the market for entertainment is very large. And we face competition from all kinds of directions. So whether it is linear, or streamers or video games or social media, it is also a very dynamic, competitive market as we and all of our competitors seek to provide better and better options for consumers.

And one of those changes, one of those vectors of dynamicism has been that sort of steady inevitable shift to streaming and on-demand as more services move deliver their content in a way that we all know consumers want. That creates increasing competitive pressure for us that we have got to respond to. We also see free services as a form of strong competition. Free is very powerful from a consumer perspective. So it is not surprising that some free services are growing in engagement. But I think Ted said it well earlier in the call, not all hours are created equal. And we have a different profit model from other services, a strong profit model.

So we are going to compete to win more moments of truth for sure. But especially compete to win those most profitable moments. And back to your specific question, it is worth remembering there is about 80% of total TV view share that neither Netflix, Inc. or YouTube are winning right now. We think that represents a huge opportunity for which we are competing aggressively and we aim to grow our share.

Ted Sarandos: The vast majority of our money and attention is focused on that 80%.

Spencer Wang: Thank you. Next question from Justin Patterson of KeyBanc. Could you please talk about your generative AI initiatives? Where do you think GenAI will be most impactful over time, revenue or expense efficiency?

Spencer Neumann: Well, I may take start with the with GenAI.

Ted Sarandos: We remain convinced that AI represents an incredible opportunity to help creators make films and series better, not just cheaper. There are AI-powered creator tools. So this is real people doing real work with better tools. Our creators are already seeing the benefits in production through previsualization and shot planning work and certainly visual effects. It used to be that only big-budget projects would have access to advanced visual effects like de-aging. Remember last quarter, we talked about Pedro Paramo. Well, that is just no longer the case. And, you know, this year, we had El Atonata. It is a very big hit show for us. From Argentina.

In that production, we leveraged virtual production and AI-powered VFX there was a shot in the show that the creators wanted to show a building collapsing in Buenos Aires. So our iLIGHT team iLIGHT team partnered with their creative team using AI-powered tools they were able to achieve an amazing result with remarkable speed. And in fact, that VFX sequence was completed 10 times faster than it could have been completed with visual, traditional VFX tools and workflows. And, also, the cost of it would just not have been feasible for a show in that budget. So that sequence actually is the very first GenAI final footage to appear on screen in a Netflix, Inc. original series or film.

So the creators were thrilled with the result. We were thrilled with the result. And more importantly, the audience was thrilled with the result. So I think these tools are helping creators expand the possibilities of storytelling on screen, and that is endlessly exciting.

Greg Peters: And maybe to cover a few of the other areas. You know, the member experience is a place where we feel like there is tons of opportunity to leverage these new generative technologies to improve the experience. You know, we have been in the personalization and recommendation business for, you know, two decades. But yet we see a tremendous room and opportunity to make it even better by leveraging some of the more newer generative techniques.

We are also rolling out have piloted right now a conversational experience that uses allows our members to basically have a sort of natural language discussion with our user interface saying, you know, I want to watch a film from the eighties that is, you know, a dark psychological thriller, get some results back, maybe iterate through those in a way that you just could not have done in our previous experiences. So that is super exciting and, you know, we see that all of the work that we do there essentially is a force multiplier to that large content investment we are making.

If we do a better job there, that means every dollar that we spend means more value back to our members by connecting them with the titles that they are truly going to love. Advertising is another really great area. You know, we have seen it is a high hurdle to create a brand forward spot in a creative universe of one of the titles that we are currently carrying. But it is very compelling for both watch and for those brands, and we think these generative techniques can decrease that hurdle iteratively over time and enable us to do that in more and more spots.

So there is a bunch of places where we think we have got an advantage in terms of data and scale where we can leverage these new generative techniques to deliver just more benefits for our members and for our creative community.

Spencer Neumann: Yeah.

Ted Sarandos: If you do not mind me coming back for one second, I just rolled off iLine as if everyone knows what iLine is. I probably should clarify that iLine is our production innovation group inside of our VFX house at Scanline, and they are doing a lot of this work with our creators. So I just realized that I just threw that out there as everyone knew.

Spencer Wang: Thanks for clarifying, Ted. Let us see. Our next question comes from Brian Pitts of BMO Capital Markets. With your evolving gaming ambitions, including partnerships with Grand Theft Auto and the recently announced Roblox agreement, can you talk to near-term monetization opportunities within gaming?

Greg Peters: Sure. We look at the near-term monetization opportunity with games very similar to how we have looked at other new content categories can think unscripted or film or on and on. And that is essentially if we deliver more value in our offering, we get increased user acquisition, we get increased retention, we get increased willingness to pay. So it drives all of the sort of core fundamentals of our business. We have seen those positive effects, albeit in a small way relative to the size of our overall business. When it comes to members playing games on the service. We already have those positive proof points.

And we are going to ramp our investment in this area, which is currently quite small compared to our overall content investment. As we ramp the size of those positive effects. So we want to remain disciplined not investing too far ahead of demonstrating that we know how to translate that investment into value for our members. We have seen good progress, as you note, with licensed games like GTA. We have seen good progress with games we developed like Squid Game Unleashed, so you will see more from us in both of those categories. As well as a whole new set of interactive experiences that we think that we are either in a unique or differential position to deliver.

So we are super excited to roll those out over the next year. And then we remain open to the core question. We remain open to evolving our monetization model, but we have got to get to a lot more scale before that becomes a really materially relevant question. So we are going to do that work first. It is probably worth restating, the TAM for this market is very, very large. We remain convicted about our strategic opportunity and excited to make more progress.

Spencer Wang: Thanks, Greg. We will take our last question. From Jessica Reif Ehrlich of Bank of America Securities. Given your healthy balance sheet and what appears to be a coming wave of M&A and media globally, are there certain types of assets that would strengthen your moat i.e., what is your view of owning successful IP or studio assets as they come to market?

Spencer Neumann: I will take that one, Spencer. Thanks, Jessica. Well, we agree. Continued consolidation of studio and network assets is likely. But at least with respect to consolidation, within legacy media, we do not think it materially changes the competitive landscape. As you also know, we have historically been more builders than buyers, and we continue to see big runway for growth without fundamentally changing that playbook. You heard a lot of that today. So we look at a lot of things. We apply a framework or lens to those opportunities when we look at, you know, is it a big opportunity? Does it strengthen our entertainment offering? Does it strengthen our capabilities? Does it accelerate our strategy?

And we look at all of that relative to the opportunity cost of distraction or other alternatives. We have been pretty clear in the past that we also have no interest in owning legacy media networks so that also kind of reduces the funnel for us. But you know, in general, we believe we can and will be choosy. We have got a great business. We are predominantly focused on growing that organically, investing aggressively in responsibly into that growth. And returning excess cash to shareholders through share repurchase and you will see us continue on that path.

Spencer Wang: Great. Thanks, Spence. And that will wrap up our Q2 earnings call. So we thank you all for taking the time to join us, and we look forward to seeing you all next quarter. Thank you.

Ted Sarandos: Conditioning. Yeah. And much like France and France, they have three hot

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Netflix (NFLX) Q2 2025 Earnings Call Transcript

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Image source: The Motley Fool.

DATE

Thursday, July 17, 2025 at 4:45 p.m. ET

CALL PARTICIPANTS

Co‑Chief Executive Officer — Ted Sarandos

Co‑Chief Executive Officer — Greg Peters

Chief Financial Officer — Spencer Neumann

Vice President, Finance, IR, and Corporate Development — Spencer Wang

Need a quote from one of our analysts? Email [email protected]

TAKEAWAYS

Full-Year Revenue Guidance: raised guidance from the prior range of $43.5 billion to $44.5 billion, primarily due to foreign exchange tailwinds and stronger member growth.

Operating Margin: Reported margin target increased to 30%, up from 29%. FX-neutral margin up 50 basis points on membership and ads revenue lift, with operating expenses unchanged from the prior forecast.

Advertising Revenue: Ad-supported business is expected to approximately double revenue, tracking slightly ahead of beginning-of-year expectations and supported by the global ad tech stack rollout and strong upfront results.

Member Metrics: Retention rates remain stable and industry-leading; no major changes observed in plan mix or plan take rate; engagement remains healthy according to management metrics.

Engagement Growth: Per-owner-household engagement has remained stable for two and a half years through the rollout of paid sharing and increased competition.

Content Investment: Content amortization is projected at more than $16 billion for 2025. Content amortization has grown more than 50% since 2020, designed to support both new and returning global titles.

Regional Partnerships: TF1 partnership in France initiated to accelerate highly localized content offerings, leveraging new capabilities including live and advertising integration.

Live Content Milestone: Successfully delivered concurrent global live events using internally developed infrastructure, with plans to expand live offering and maintain partnership-based production model.

Generative AI Adoption: Achieved a tenfold speed improvement in VFX delivery for “El Atonata” using GenAI-powered production tools in 2025, marking first GenAI final footage in original content.

Gaming Strategy: Monetization approach remains focused on driving acquisition, retention, and willingness to pay; management describes game-related investment as disciplined and incremental relative to overall content spend.

User Interface Overhaul: The newly launched UI is delivering better performance than prelaunch testing across the initial rollout to the first large wave of TV devices, with improvements observed in a variety of metrics tracked by management.

M&A Discipline: Management reaffirmed focus on organic growth and disciplined evaluation of potential acquisitions, reiterating no interest in owning legacy linear TV networks.

SUMMARY

Management upgraded full-year revenue and reported margin guidance for 2025, as increasing FX benefits and stronger member growth flowed directly to profitability while operating expenses remained flat in forecasts. The global rollout of Netflix, Inc.'s ad tech stack fueled rapid expansion in advertising sales and simplified inventory access for marketers worldwide. Recent product launches—such as the enhanced user interface and generative AI-powered production—have delivered demonstrable performance gains. Management outlined a disciplined strategy for live and sports content, emphasizing scalable infrastructure, partner models, and a global roadmap to expand the live offering within economic constraints.

CFO Neumann explained, "we expect operating margins to be up year over year in each quarter, including Q4, and as just noted, we expect to deliver strong full-year margins, as we just raised our guidance to 29.5% FX-neutral and 30% reported for full-year 2025."

The company completed the global implementation of its proprietary ad technology, enabling programmatic sales and the introduction of additional demand sources, including Yahoo, to broaden advertiser reach.

Co-CEO Peters said, "we are in this phase of learning and improving quickly based on the fact that being live everywhere means that you get a bunch of feedback about what we can do better, which is great."

With the new TF1 partnership, Netflix, Inc. is testing a model for scaling local content through collaborations with leading linear broadcasters; consumer response will guide potential expansion of this approach.

Co-CEO Sarandos noted ongoing commitment to reinvestment: "It is our objective to sustain healthy revenue growth, reinvest in the business to improve on all aspects of the service, and that includes growing content spend, strengthening and expanding the entertainment offering, and to drive that positive flywheel of growth by adding value to our members"

INDUSTRY GLOSSARY

TF1: France’s leading broadcast television network and Netflix, Inc.'s inaugural traditional broadcaster partner for localized content expansion.

Paid Sharing: A Netflix, Inc. policy restricting account use to a single household, aiming to convert password-sharing users into paying subscribers.

Ad Tech Stack: Proprietary technology platform enabling programmatic advertising, advanced targeting, and self-serve tools for Netflix, Inc.'s ad-supported streaming plans.

GenAI: Generative artificial intelligence technologies used to accelerate content production, personalization, and advertising at Netflix, Inc.

iLine: Netflix, Inc.’s in-house production innovation group within its Scanline VFX division, specializing in advanced visual effects using AI-powered tools.

Full Conference Call Transcript

Spencer Wang: Good afternoon, and welcome to the Netflix, Inc. Q2 2025 earnings interview. I am Spencer Wang, VP of Finance, IR, and Corporate Development. Joining me today are Co-CEOs, Ted Sarandos and Greg Peters, and CFO, Spencer Neumann. As a reminder, we will be making forward-looking statements, and actual results may vary. We will take questions submitted by the analyst community, and we will begin with our results and our forecast. The first question comes from Steve Cahall of Wells Fargo. The question is, since the revenue increase in your forecast is primarily FX driven, we are curious about the components of the constant currency increase.

Is this due to a better underlying revenue growth, or are there specific expenses that are coming in better, like content amortization? I will take that one. Thanks, Steve. So I

Spencer Neumann: As you saw on the letter, we increased our full-year revenue guidance to $44.8 to $45.2 billion. That is up from the prior guide of $43.5 to $44.5 billion. So up about a billion at the midpoint of the range and a tighter range. As you noted, primarily reflects the FX impact from the weakening dollar relative to most other currencies. But the good news is we are also seeing strength in our underlying business. We have got healthy member growth, and that even picked up nicely at the '2 a bit more than we expected. We think that will carry through with our strong back half slate. So we are reflecting that in our latest forecast.

We are also seeing nice momentum in ad sales, still off a pretty small base, but good growth and it is on pace to roughly double our revenue in the year. And it is a bit ahead of beginning of year expectations. So when we carry all that through to operating margin, our operating expenses are essentially unchanged, which is part of your question. So they are basically unchanged forecast to forecast. So we are largely flowing through the expected higher revenues to profit margins.

So that is why our updated target full-year reported margin is up a point from 29% to 30% and that 50 basis point increase in FX neutral margin is really just that revenue lift from stronger membership growth and ads relative to prior forecast flowing through the margin.

Spencer Wang: Thank you, Spence. We will take our next question from Barton Crockett of Rosenblatt Securities. Why is operating margin guidance for the full year only 30% after the upside in February and a forecast 31.5% for the third quarter? Is there a timing issue, FX issue, or is there a new level of spending that will continue beyond the fourth quarter of 2025?

Spencer Neumann: Well, this is really mostly timing. So thanks, Barton. We primarily, as a reminder, manage to full-year margins. And we expect our content expenses will ramp in Q3 and Q4. We have got many of our biggest new and returning titles and live events in the back half of the year. We have also, you know, Q4 is typically a and generally almost always is a heavier film slate. Sure. We will talk about our expect we will talk about more of this on the call. Also be marketing to support that heavier slate, and we are continuing to aggressively build out our ad sales infrastructure and capabilities through the year. So all of that is to be expected.

We can manage to it. We manage to those margins. And even with that back half ramp in expenses, we expect operating margins to be up year over year in each quarter, including Q4, and as just noted, we do expect to deliver strong full-year margins as we just took up our guide to, you know, 29.5% FX neutral, 30% reported.

Spencer Wang: Great. Thanks, Spence. The next question comes from Tom Champion of Piper Sandler. How has your view of the consumer and the macro economy changed over the last ninety days?

Greg Peters: Similar to last quarter, we are carefully watching consumer sentiment in the broader economy. But at this point, really nothing significant to note in the metrics and the indicators that we get directly through the business. Those are retention that remains stable and industry-leading. There have been no significant shifts in plan mix or plan take rate. And the price changes we have done since the last quarter have been in line with expectations. Engagement also remains healthy. So things all look stable from those indicators and big picture entertainment in general and Netflix, Inc. specific have been historically pretty resilient in tougher economic times.

We also think that we are an incredible entertainment value not only compared to traditional entertainment, but if you think about streaming competitors, when we start at $7.99 in The United States, you think about all the entertainment you get we have a belief and expectation that demand for not only entertainment but for us specifically will remain strong.

Spencer Wang: Thanks, Greg. I think a nice follow-up to this question will be on advertising. So from Ben Swinburne of Morgan Stanley, can you share any data points around your upfront negotiations?

Greg Peters: Yep. As we noted in the letter, our US upfront is nearly complete. We have closed a large majority of deals with the major agencies. Those results have generally been in line or slightly better than our targets and consistent with our goal to roughly double the ads business this year. And what are advertisers excited about? Growing scale is something we definitely hear. Also, a highly engaged audience. So bigger audience, but also an audience that is more engaged relative to our peers. The rollout of our own ad tech stack, which helps deliver a bunch of features, and then our slate, which is generally amazing and includes a growing number of live events that advertisers are excited about.

Spencer Wang: Great. Follow-up question on advertising from Vikram of Baird. How have advertisers in The US responded to the Netflix, Inc. ads suite rollout since the April launch? What features and capabilities are attracting the most interest, and how is the initial feedback in other regions outside of The US?

Greg Peters: We have completed the rollout of our own ad tech stack and the Netflix, Inc. ad suite to all of our ad markets now. So we are fully on our own stack around the world at this point. That rollout was generally smooth across all countries. We see good performance metrics across all countries, and the early results are in line with our expectations. Now we are in this phase of learning and improving quickly based on the fact that being live everywhere means that you get a bunch of feedback about what we can do better, which is great.

As we mentioned before, the most immediate benefit from this rollout is just making it easier for advertisers to buy on Netflix, Inc. We hear that benefit, that ease, from direct feedback talking to advertisers. They tell us that it is easier. See it in our overall sales performance. We have seen an increased programmatic buying. So all of these are consistent, you know, with what we were expecting both qualitatively and from a metrics perspective. We are also, I guess, worth noting that we are going to roll out additional demand sources like Yahoo that will further open up the market for us.

Long term, being on our own stack, that improves the speed of our execution to deliver this, you know, pretty significant roadmap of features that we have in front of us. It is things like improved targeting and measurement. There is also leveraging advertiser and third-party data which we definitely hear demand for as well. And it will ultimately allow us to improve the ad experience for our members. Which is critically important. So that means better ads personalization. So the ads that I see are increasingly different from the ads that, let us say, Ted would see.

And they are more relevant for each of us, which is good for us as users, and it is good for the brands. Also going to be introducing interactivity in the second half of the year, so that is exciting. So that is all to say this is, you know, a pretty significant milestone for us, one we are super excited to get behind us because now we can shift into this steady release cycle where we are dropping new features all the time, both for advertisers and for members. And that is the development and release that we have in other parts of the business. So it is fun to be able to get to that point.

Spencer Wang: Thanks, Greg. I will move this along now to a set of questions around content as engagement. This one comes from Ben Swinburne of Morgan Stanley. 1% engagement growth year over year suggests engagement is down year over year on an average per member basis. How do we reconcile that with engagement growing on a per member household basis if that is still accurate?

Greg Peters: So total view hours did grow a bit in the first half of 2025, and that is despite a particularly back half-weighted slate. But to your point on engagement on a per member basis, we have mostly been focused for the last few years on measuring engagement on what we call an owner household basis. So this takes out the borrower effect, and we obviously think this is the best way to assess our engagement per member because it removes the tricky comparison impacts from paid sharing.

So that metric per owner household engagement has been relatively steady over the past two and a half years throughout the rollout of paid sharing, and amidst increasing competition for TV time as more viewing moves to streaming and gets this on-demand benefit. So we are glad to have held that normalized engagement level, but we clearly also want to increase it. And to that end, we are optimistic and expect that our engagement growth in the second half of this year will be better than in the first half given our strong second half slate.

Spencer Wang: Thanks, Greg. Great segue to Doug Inmuth's question from JPMorgan. The content in the back half of the year looks strong with Squid Game 3 already the third most popular non-English series ever, and Wednesday and Stranger Things releasing in the coming months. You often say that no single title drives more than 1% of total viewing. So how do you think about the business currently as being quote, hit boosted or hit driven, and are you confident that both original and licensed content momentum can continue in 2026?

Ted Sarandos: Yeah. I will take that. And thank you, Doug. On the first part of your question, we are definitely riding this long-term trend of linear to streaming. And that has a natural adoption curve. But we can accelerate our growth with big hits. But as you said, each one of them, even in success, is going to drive about 1% of total viewing. So you need a lot more than just a big hit every once in a while. So to your point, it is not about the single hit. So what it is about a steady drumbeat of shows and films and soon enough games that our members really love and continue to expect from us.

So, like, by way of example, we had 44 individual shows nominated for Emmys this year. So that is what quality at scale looks like. We ended the quarter with a huge return to Squid Game. Thanks for acknowledging. I will go into the second half with the return of Wednesday and Stranger Things. And a really strong slate of supporting titles and favorites, like and new shows. Like next week or this week, we have Eric Bonnett's Untamed. Next week, we have Leanne Morgan's new comedy show Leanne. Both look really great. And that is just to name a few.

And the back half of the year also has this perhaps the most anticipated slate of new movies that we have ever had. That starts on the 25th with Happy Gilmore 2, followed by we have a new Knives Out film. We have new films from Noah Baumbach, from Guillermo del Toro, from Catherine Bigelow. And it does not stop there. It does roll right into 2026, and that is the second part of your question. And we are looking forward to movies like the rip from Ben Affleck and Matt Damon. Shirley starred on a new movie called Apex, which is a phenomenal action movie. Millie Bobby Brown is back in Enola Holmes 3.

Recall that in 2023, Enola Holmes was our biggest two was our biggest movie. So we are looking forward to that new sequel.

Spencer Wang: And Greta Gerwig's Narnia is going to be phenomenal.

Ted Sarandos: And then on top of that, we talk about Return of Bridgerton, One Piece, Avatar: The Last Airbender, all three huge successes around the world. The Gentleman, Four Seasons, Point Break I am sorry, Running Points. Sorry. Beef, which as you recall in 2023, won just about every award imaginable and was a gigantic success for us. It is back for a new season in '26. Three Body Problem, Love is Blind, Outer Banks, and not just from The US, from France, we have LuPan. From Spain, we have Berlin. We have a new season of a hundred years of from Colombia. So big hit returning shows and new series. From each of our regions around the world.

And the new stuff we have got coming up like man on fire, reimagining of little house on the prairie, The Duffer brothers from Stranger Things have a brand new show. The Burrows. We have got the Human Vapor from Japan. Operation Safred Cigar from India, can this love be translated from Korea? So again, popular programming, new and returning from all over the world in 2026. Unscripted shows like the reboot of star of Star Search, we have got into the doll universe. With Wonka's golden ticket, which we are really excited about.

In our live, we have got a few surprises for you next year, but of course, we have our NFL Christmas Day doubleheader that we are really thrilled about too. So we are really incredibly excited about the back half of this year and confident that it keeps rolling in 26.

Spencer Wang: Thank you, Ted. We will take the next question from Rich Greenfield of LightShed Partners. Who asks, are you concerned by the stagnation in your viewing share domestically?

Spencer Neumann: Think Rich is probably referring to the Nielsen gauge data. Do you need to spend more on programming or spend differently to materially move your viewing share higher?

Ted Sarandos: Yeah. Thanks, Rich. Look, our goal continues to be to continue to grow our share over the long term. And over the past few years, you are right, we have been able to maintain our share even as we work through a growing number of TV-based streaming services, some free, some paid. And the impact of paid sharing that Greg mentioned earlier as well as this, you know, 2025 slate that was more back half-weighted than we typically have in previous years. But over the long term, we tend to keep growing as the other 50% of TV viewing migrates from linear to streaming. And we will do that by doing what we have always done, continuously improve the service.

So in mind, since 2020, our content amort has grown more than 50%. You know, from under $11 billion to more than $16 billion. That we expect to do this year. And over that same time period, we definitely had we saw a big increased spending, but also increased engagement. In increased revenue, increased profit, and increased profit margin. So that is our model in action.

It is our objective to sustain healthy revenue growth, reinvest in the business to improve on all aspects of the service, and that includes growing content spend, strengthening expanding the entertainment offering, and to drive that positive flywheel of growth by adding value to our members and all the while growing engagement revenue and profit around the world.

Spencer Wang: Great. Thank you, Ted. I will move to Alan Gould from Loop Capital next. Can you provide more information on the TF1 partnership? Why did you choose to add TF1 in France as opposed to other broadcasters as your first partner, why is now the right time to create such a partner? Should we anticipate similar partnerships in other countries?

Greg Peters: Yeah. Perhaps to start with the rationale for the partnership. You would think with that long list of amazing titles that Ted just rattled off, we would have enough to satisfy every person on the planet. But it turns out we actually consistently hear from our members that they want more. They want more variety, more breadth of content. So the fundamental purpose for this TF1 partnership is all about that goal. Of expanding our entertainment offering. How do we enhance the value we deliver to members? Want to provide more content, more variety, more quality. So just as you have seen us do with licensing and production, this is just another mechanism to expand that offering.

And in this case, it is specifically about highly relevant local for local content in a country that has strong demand for that local content. This is an accelerated way to satisfy that need. Why now? Why was this time the right time? Well, we have invested a lot in a bunch of enabling capabilities that are either required or highly leveraged by this deal. You can think live, ads, the new UI, among other things. And then why TF1 versus some other partner? Well, we know each other really well. We wanted our first partner to be in a big territory. We wanted to pick the leading local programmer.

We wanted to be highly aligned in terms of the deal and the shape of the partnership and the values that we thought we could generate mutually by working together for our customers. And we both look at this as an opportunity to learn, to figure out how do we scale the local content that TF1 is producing to more customers in France. So we are looking forward to seeing what consumers think. You never really know until you get out there and get the real reactions. And then, obviously, we will factor that into our plans going forward.

Ted Sarandos: Thanks, Greg.

Spencer Wang: From Robert Fishman of MoffettNathanson, with reports suggesting Apple is now in the driver's seat for F1 rights. Uh-huh. Unintended, I guess. Plus UFC and MLB still looking for new deals and the NFL may be looking to come to market a year earlier. Can you share updated thoughts on how you are approaching sports rights for Netflix, Inc. and where you draw the line on something that can move the needle?

Ted Sarandos: Wow. Thanks for that, Robert. Remember, sports are a subcomponent of our live strategy. But our live strategy goes beyond sports alone. Our live strategy and our sports strategy are unchanged. You know, we remain focused on ownable big breakthrough events that because our audiences really love them. Anything we chase in the event space or in the sports space has got to make economic sense as well. You know, we bring a lot to the table, the deals that we make have to reflect that. So live is a relatively small part of the total content spend. And we have got about 200 billion view hours.

So it is a pretty small part of view hours as well right now. That being said, not all view hours are equal. And what we have seen with live is it has outsized positive impacts around conversation, around acquisition, and we suspect around retention. And but so right now, we are very excited where we sit. Very excited with the existing strategy. We are excited about the Canela Crawford fight and September and the SAG Awards and our weekly WWE matches. And the NFL, of course, which is a great property, and we are happy to have Christmas Day doubleheader, which includes Dallas versus Washington. And Detroit versus Minnesota.

So today, our live events have all primarily been in The US, keep in mind. So over time, we are going to continue to invest and grow our live capabilities for events around the world in the years ahead. So we are excited, but the strategy is unchanged.

Spencer Wang: Thanks, Ted. Good follow-up question on that one from Steve Cahall of Wells Fargo. What investments have you made to increase your capabilities in producing live events? What have you been able to do in house in 2025 that you could not do last year? And how long will it take before you have the capability to produce large-scale events like NFL games?

Ted Sarandos: Yeah. Thanks, Steve. I would say remember, when we started original scripted programming, we had zero production capability. House of Cards was in fact thinking about our first three years of original programming, all of those shows were produced by others. Have to go three years later, we have produced Stranger Things in house. Today, we still have shows that are produced by others. Universal, Twentieth Television, which is Disney, Paramount, Lionsgate, Warner Television, there is lots of available infrastructure to produce TV. And that is true of live events and sports as well. If we when we do more and more, we may choose to bring some of that in house.

We have already produced a few, and we are just as likely to continue to use partners with existing production infrastructure and work to make sure that those productions are bespoke and they feel like they could only be on Netflix, Inc. So you should not think about the mix of partnerships and self-producing as a we think about it as a scaling tool. Not backfilling some, like, lack of ability in some area of the company. So and I should note by example, CBS is a phenomenal partner producing NFL games with us, and we are thrilled to work with them again this year on Christmas Day.

Greg Peters: Maybe take this opportunity just to some commentary on the general capability we have been building with live. Know, when we start something new, we pretty much expect that we are not going to be brilliant at it at the beginning. What? But we yeah. That is true. And we do not have any real reason to believe that. But we do not let that stop us from kicking off initiatives that we believe have a strong strategic rationale even though we know we need to develop that capability. Of course, our job is to get out there and learn by doing and get world-class as quickly as we possibly can.

And if you look at our current capabilities around live, we are in just a completely different place today compared to when we first started. As a good example that just happened last Friday, we had our first concurrent pair of live events. We had Taylor versus Serrano globally delivered alongside WWE SmackDown, was delivered ex US. Both events at scale and delivered with extremely high quality. So it is great progress we have seen, and we have got a great roadmap ahead of us to continue to enhance those experiences. For folks.

Spencer Wang: Thank you both. Last question on the content side or the topic of content comes from Ben Swinburne of Morgan Stanley. What are the learnings from the success of K-Pop Demon Hunters? More animated musicals with fictional bands, question mark. That is a question from a man who probably has that movie playing on repeat in their home if I am guessing correctly. K-Pop Demon Hunters is a phenomenal success out of the gate. One of the things that I am really proud of the team over

Ted Sarandos: is original animation, not sequel, not live-action remake. Original animation feature is very tough and has been struggling for years. And I think the fact that our biggest hits now, Leo, Seabeast, and now K-Pop Demon Hunters, are original animation. So we are super thrilled about that. The mix of music and pop culture, getting it right matters. Good storytelling matters. The innovation in animation itself matters. And the fact that people are in love with this film and in love with the music from this film that will keep it going for a long time. So we are really thrilled. And now the next beat is where does it go from here?

So know, we put in the letter how just how successful the music has been. And continues to be, and we think that will drive fandom for this fictional K-Pop band that we have. But more importantly, for the song Golden and for the song Soda Pop, these are enormous hits, and they all came from a film that is available only on Netflix, Inc. So we are really excited that we can pierce the culture with original animated features considering that folks have been poking us on it.

Spencer Neumann: Let us do it again later in the year within your dreams. Right, Ted? Absolutely. In your dreams, another very

Ted Sarandos: funny one and also completely original. So Yeah.

Spencer Wang: Great. I will move us on now to a few questions on plans as well as product. So from Michael Morris of Guggenheim, he asks, Netflix, Inc. continues to broaden content genres notably with live sports and the recently announced TF1 partnership. Is there a path to additional tiers of service based on types of content available, or will Netflix, Inc. always make all content available at the ad-free/ad-supported price points?

Greg Peters: I have learned to never say never, so I would say we remain open to evolving our consumer-facing model. Think we have got a few principles, important principles that we are carrying with us that I do not see changing significantly. One is we want to provide members choice. Right? So how do we have a different set of plans, a different price points, different features that allows folks to opt in to what their is the right Netflix, Inc. for them. Also, how do we provide good accessibility to new members around the world? We want to grow, and that means making that we have got accessible price points.

And then finally, the plans we offer, they have to know, ensure that we are having reasonable returns to the business based on the entertainment value that we deliver, and we are hoping to grow those and so those returns would grow as well. Now obviously, the reason to do that is we can continue to reinvest in adding more entertainment and building a better experience. And maybe one other thought too is there is a component of complex in ChoiceDax that we have to consider in how we think about our offering. It is structured. So having said all that, though, I think we believe that the bundle is a great value for members.

It allows members around the world to access a wide range of entertainment in a very easy way at a very reasonable price. So I would expect that will remain an important feature of our offering for the foreseeable future.

Ted Sarandos: A lot of value and simplicity.

Spencer Neumann: Yeah.

Spencer Wang: Great. From Rich Greenfield of LightShed Partners, help us understand why your new UI/UX is so important as you expand live content. Beyond live, can you provide some color on what metrics have improved since the launch of the new UI, such as speed of users finding a title and change in failed sessions.

Greg Peters: As we said previously, it is really hard for a new UI to immediately compete, be better than the UI that we have had for the past ten years that has been iteratively evolved and improved. But now that we have actually rolled out this new UI to the first large wave of TV devices, we are actually seeing performance that is better than what we saw in our prelaunch testing. To some degree, that is expected because we made some improvements based on the results of that testing phase. So it is exciting to see that those delivered actual better results.

But the rate of that change actually gives us increased confidence that this new experience will drive better performance, by the variety of metrics we look at some of which include the ones that Rich is mentioning in relatively short order. And then maybe just a point on why are why do we build this and launch this new experience the first place? Why was this so important? Bluntly, the previous experience was designed for the Netflix, Inc. of ten years ago, and the business has involved considerably since then. We got a wider breadth of entertainment options. We got TV and film, more of those, of course, from around the world, but now also games and live events.

If you think about the discovery experience that is best suited for these new content types, it is inherently different. Helping our members understand that there is a really good reason for them to launch Netflix, Inc. and tune in at 7PM on a Friday night versus just showing up whenever they were free and wanted to be entertained. That is a totally different job, and we really need a different user interface to do that job well. Add to that, we saw the opportunity to leverage newer technologies, like real-time recommendations that respond dynamically to what you need from us in that specific moment.

So the Netflix, Inc. you get on a Tuesday night is different from the Netflix, Inc. you get on a Sunday afternoon. But all of those rationales together and what we are seeing in terms of the performance so far, we are very confident that we have got a much better platform in this new user experience to build from to continue to improve, and that will help us meet the needs of the business over the years to come.

Spencer Wang: Thanks, Greg. The next question comes from Steve Cahall of Wells Fargo. YouTube is the only streamer that exceeds Netflix, Inc. in terms of US share of TV time. Do you see an opportunity to bring notable YouTube creators and their content exclusively to Netflix, Inc.? How big could this opportunity be?

Ted Sarandos: Thanks, Steve. Look. We want to be in business with the best creatives on the planet. Regardless of where they come from. Some of them are here in Hollywood. Others are Korea, some are in India. And some are creators that distribute only on social media platforms, and most of them have not yet been discovered. So, for those creators doing great work, we have phenomenal distribution. Desirable monetization, brilliant discovery in our UI, and a hungry audience waiting to be entertained. So Steve, you recently I think I listened to you on a podcast where you talked about our business model and on this I believe on this very topic.

And we largely agree with you and believe that working with a wide set of content creators makes a lot of sense for us. And as you said, if I am remembering it right, not everything on YouTube will fit on Netflix, Inc. We could not agree with that more. But there are some creators on YouTube like Miss Rachel that are a great fit. If you could saw on the engagement report, she said 53 million views in 2025 on Netflix, Inc. So she clearly works on Netflix, Inc. And we are really excited about the Sidemen and pop the balloon and a wide variety of and video podcasters that might be a good fit for us.

And particularly if they are doing great work and looking for different ways to connect with audiences.

Greg Peters: And maybe broadening this out for a second, and taking that question to look at sort of all of the competitors. That we face for our share of TV time. We have always said that the market for entertainment is very large. And we face competition from all kinds of directions. So whether it is linear, or streamers or video games or social media, it is also a very dynamic, competitive market as we and all of our competitors seek to provide better and better options for consumers.

And one of those changes, one of those vectors of dynamicism has been that sort of steady inevitable shift to streaming and on-demand as more services move deliver their content in a way that we all know consumers want. That creates increasing competitive pressure for us that we have got to respond to. We also see free services as a form of strong competition. Free is very powerful from a consumer perspective. So it is not surprising that some free services are growing in engagement. But I think Ted said it well earlier in the call, not all hours are created equal. And we have a different profit model from other services, a strong profit model.

So we are going to compete to win more moments of truth for sure. But especially compete to win those most profitable moments. And back to your specific question, it is worth remembering there is about 80% of total TV view share that neither Netflix, Inc. or YouTube are winning right now. We think that represents a huge opportunity for which we are competing aggressively and we aim to grow our share.

Ted Sarandos: The vast majority of our money and attention is focused on that 80%.

Spencer Wang: Thank you. Next question from Justin Patterson of KeyBanc. Could you please talk about your generative AI initiatives? Where do you think GenAI will be most impactful over time, revenue or expense efficiency?

Spencer Neumann: Well, I may take start with the with GenAI.

Ted Sarandos: We remain convinced that AI represents an incredible opportunity to help creators make films and series better, not just cheaper. There are AI-powered creator tools. So this is real people doing real work with better tools. Our creators are already seeing the benefits in production through previsualization and shot planning work and certainly visual effects. It used to be that only big-budget projects would have access to advanced visual effects like de-aging. Remember last quarter, we talked about Pedro Paramo. Well, that is just no longer the case. And, you know, this year, we had El Atonata. It is a very big hit show for us. From Argentina.

In that production, we leveraged virtual production and AI-powered VFX there was a shot in the show that the creators wanted to show a building collapsing in Buenos Aires. So our iLIGHT team iLIGHT team partnered with their creative team using AI-powered tools they were able to achieve an amazing result with remarkable speed. And in fact, that VFX sequence was completed 10 times faster than it could have been completed with visual, traditional VFX tools and workflows. And, also, the cost of it would just not have been feasible for a show in that budget. So that sequence actually is the very first GenAI final footage to appear on screen in a Netflix, Inc. original series or film.

So the creators were thrilled with the result. We were thrilled with the And more importantly, the audience was thrilled with the result. So I think these tools are helping creators expand the possibilities of storytelling on screen, and that is endlessly exciting.

Greg Peters: And maybe to cover a few of the other areas. You know, the member experience is a place where we feel like there is tons of opportunity to leverage these new generative technologies to improve the experience. You know, we have been in the personalization and recommendation business for, you know, two decades. But yet we see a tremendous room and opportunity to make it even better by leveraging some of the more newer generative techniques.

We are also rolling out have piloted right now a conversational experience that uses allows our members to basically have a natural language discussion with our user interface saying, you know, I want to watch a film from the eighties that is, you know, a dark psychological thriller, get some results back, maybe iterate through those in a way that you just could not have done in our previous experiences. So that is super exciting and, you know, we see that all of the work that we do there essentially is a force multiplier to that large content investment we are making.

If we do a better job there, that means every dollar that we spend means more value back to our members by connecting them with the titles that they are truly going to love. Advertising is another really great area. You know, we have seen it is a high hurdle to create a brand forward spot in a creative universe of one of the titles that we are currently carrying. But it is very compelling for both watch and for those brands, and we think these generative techniques can decrease that hurdle iteratively over time and enable us to do that in more and more spots.

So there is a bunch of places where we think we have got an advantage in terms of data and scale where we can leverage these new generative techniques to deliver just more benefits for our members and for our creative community.

Spencer Neumann: Yeah.

Ted Sarandos: If you do not mind me coming back for one second, I just rolled off iLine as if everyone knows what iLine is. I probably should clarify that iLine is our production innovation group inside of our VFX house at Scanline, and they are doing a lot of this work with our creators. So I just realized that I just threw that out there as everyone knew.

Spencer Wang: Thanks for clarifying, Ted. Let us see. Our next question comes from Brian Pitts of BMO Capital Markets. With your evolving gaming ambitions, including partnerships with Grand Theft Auto and the recently announced Roblox agreement, can you talk to near-term monetization opportunities within gaming?

Greg Peters: Sure. We look at the near-term monetization opportunity with games very similar to how we have looked at other new content categories can think unscripted or film or on and on. And that is essentially if we deliver more value in our offering, we get increased user acquisition, we get increased retention, we get increased willingness to pay. So it drives all of the sort of core fundamentals of our business. We have seen those positive effects, albeit in a small way relative to the size of our overall business. When it comes to members playing games on the service. We already have those positive proof points.

And we are going to ramp our investment in this area, which is currently quite small compared to our overall content investment. As we ramp the size of those positive effects. So we want to remain disciplined not investing too far ahead of demonstrating that we know how to translate that investment into value for our members. We have seen good progress, as you note, with licensed games like GTA. We have seen good progress with games we developed like Squid Game Unleashed, so you will see more from us in both of those categories. As well as a whole new set of interactive experiences that we think that we are either in a unique or differential position to deliver.

So we are super excited to roll those out over the next year. And then we remain open to the core question. We remain open to evolving our monetization model, but we have got to get to a lot more scale before that becomes a really materially relevant question. So we are going to do that work first. It is probably worth restating, the TAM for this market is very, very large. We remain convicted about our strategic opportunity and excited to make more progress.

Spencer Wang: Thanks, Greg. We will take our last question. From Jessica Reif Ehrlich of Bank of America Securities. Given your healthy balance sheet and what appears to be a coming wave of M&A and media globally, are there certain types of assets that would strengthen your moat i.e., what is your view of owning successful IP or studio assets as they come to market?

Spencer Neumann: I will take that one, Spencer. Thanks, Jessica. Well, we agree. Continued consolidation of studio and network assets is likely. But at least with respect to consolidation, within legacy media, we do not think it materially changes the competitive landscape. As you also know, we have historically been more builders than buyers, and we continue to see big runway for growth without fundamentally changing that playbook. You heard a lot of that today. So we look at a lot of things. We apply a framework or lens to those opportunities when we look at, you know, is it a big opportunity? Does it strengthen our entertainment offering? Does it strengthen our capabilities? Does it accelerate our strategy?

And we look at all of that relative to the opportunity cost of distraction or other alternatives. We have been pretty clear in the past that we also have no interest in owning legacy media networks so that also kind of reduces the funnel for us. But you know, in general, we believe we can and will be choosy. We have got a great business. We are predominantly focused on growing that organically, investing aggressively in responsibly into that growth. And returning excess cash to shareholders through share repurchase and you will see us continue on that path.

Spencer Wang: Great. Thanks, Spence. And that will wrap up our Q2 earnings call. So we thank you all for taking the time to join us, and we look forward to seeing you all next quarter. Thank you.

Ted Sarandos: Conditioning. Yeah. And much like France and France, they have three hot

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Anand Chokkavelu: Yes, we're talking all kinds of stocks. This week's Motley Fool Money Radio Show starts now. It's the Motley Fool Money Radio Show. I'm Anand Chokkavelu. Joining me are two of my favorite fools, Jason Hall and Matt Frankel. Today, we'll talk about stock market winners and losers from the Big Beautiful Bill. We'll pit Superman versus the Hulk, and we'll of course debate stocks on our radar. But first, we'll discuss whether there's an AI opportunity in investing in data centers. Upstart data center company, CoreWeave, again made news this week this time for announcing the purchase of Core Scientific for $9 billion. This allows it to add infrastructure to consolidate vertically as it seeks to gain market share among AI and high performance computing customers. CoreWeave is just the tip of the data center iceberg. Matt, what categories of data center opportunities are out there?

Matt Frankel: First, you have hyper scalers. These are companies like AWS, Microsoft, Desha. They are companies that operate the large scale data centers. They offer computing and storage infrastructures to customers. As Anand put it, there's CoreWeave, which is one of the least understood recent IPOs that I know. [laughs] They rent out GPU data center infrastructures to customers. It's not always practical for companies to invest in all of NVIDIA's latest chips on their own, for example. That's really what they do. There's the REITs still, Digital Realty and Equinix are the two big ones. They own the data centers. CoreWeave is actually a big Digital Realty tenant. Then there's power generation. I know Jason's going to talk about this a little bit later in the show, but data centers consume a lot of power, and it's growing at an exponential pace. These chips that NVIDIA produces, they are power drains. Nuclear, especially, could be a big part of the solution, but solar and other renewables are also in there.

Jason Hall: We're definitely in the land grab phase of the infrastructure buildout for accelerated computing. I think accelerated computing is maybe a better description than just AI. We talk about the Cloud REIT large. As we see more of the companies involved start to monetize things like AI agents at scale. I think that's where these investments are going to pay off.

Anand Chokkavelu: Big question. Do any of these categories interest you all for investing?

Matt Frankel: Well, I'm well known as being the real estate guy at the Motley Fool, so it shouldn't be a big surprise, but Digital Realty is my second largest and my second longest running REIT investment in my portfolio. I'm an Amazon shareholder, and I know that's not their only business, but AWS is the primary reason I own it. I don't own CoreWeave yet, and I think the stock is a little bit pricey, to say the least. But the more I read about it, the more I'm intrigued by the company. As I mentioned, they're a big tenant of Digital Realty, so I have some exposure already.

Jason Hall: The things about CoreWeave that concern me is the stock is definitely expensive. But if the opportunity is even close to as large as we think, it could still work out, but they're going to need a lot of money to pay for what they're trying to do and depending on how much of that is from raising debt versus secondary offerings of shares, there's still a lot of questions there. But, Anand, you've given me a chance to talk about Brookfield here. [laughs] How do I not take that opportunity? But I do think that there's a couple of Brookfield entities that are positioned really well here. I want to talk about the providing the energy part of it. Brookfield Renewable is really in the driver seat here as a global provider of renewable energy on multi decade contracts. It is not just accelerated computing, it's the energy transition REIT large. We've already seen it strike big deals with Microsoft and others to provide renewable power on those multi decade contracts. The dividend is really attractive, too. BEP, that's the partnership, yields over 5%. The corporate shares BEPC, it yields about 4.5%. Since mid 2020, that's when Brookfield Renewable rolled the corporation part out and restructured its dividend. The payouts been increased almost 30%. There's a lot to like here. Beyond the yield, I think it's primed to be a total return dynamo over the next decade. If you don't want to own a company that's in the energy part, you want to own the infrastructure, just take a look at sister company Brookfield Infrastructure. The tickers there are BIP and BIPC.

Anand Chokkavelu: Of course, these aren't the only AI stocks out there. Hi, NVIDIA. Do any other areas of AI interest you guys?

Matt Frankel: I love that. You can't talk about AI and data centers without talking about the chipmakers. NVIDIA just hit $4 trillion today as the day we're recording this. NVIDIA is an amazing business, and it has more room to grow than people think just in the data center accelerator space, which is why they're getting so much attention for good reason. The market size is expected to roughly double over the next five years. That's not even to mention the opportunities they have in chips for autonomous vehicles, chips for gaming and more but I prefer AMD, which is often referred to as NVIDIA junior, but I don't think it should be. It's an incredibly well run company that's been a mistake to bet against in the past. As Intel found out the hard way, just having a dominant market share in an area of chip making is not always enough.

Jason Hall: An area of the market that I think could do really well some of the legacy enterprise software giants. I think there may be underappreciated winners from AI. I'll use Salesforce, ticker CRM as an example. It's really starting to get traction with things like it's data cloud and with AI agents. It's starting to sell. We're seeing really rapid uptake of those things and monetization. It has a benefit, an advantage over a lot of these AI start-ups that are just pure AI businesses. It's already a trusted integrated partner with hundreds of thousands of enterprises. It knows their business, it knows their challenges, regulations, opportunities and that credibility, I think, is an edge that we don't give enough credit to. We shouldn't underestimate switching costs, I guess, is what I'm really getting at. You look at Salesforce rates for about 21 times free cash flow and less than seven times sales. That's a really good opportunity. I think it equates to double digit returns if it can just grow revenue around 8-12% a year over the long term, which I think it can.

Anand Chokkavelu: We started to talk a bit about energy and the need for it with all this AI. Let's talk about the energy industry implications of the Big Beautiful Bill, which was signed into law last week. Jason, can you give us the summary of the energy portions?

Jason Hall: Summarizing anything's hard for me, but I'll try. I think the short version is the incentives for renewables, they're getting gutted, really. There's a 30% investment tax credit or ITC for short. The residential solar and battery systems portion of that had been in place to run through 2032 before gradually declining for a few years after that. That now expires. The systems have to be fully installed and commissioned by the end of this year. The commercial ITC for solar and wind projects was on a similar track, but now it expires at the end of 2027, but those projects must begin construction by July 4th of 2026 to qualify for that 30% tax credit. It also terminates the tax credit for new and used EVs, $7,500 for a new EV and up to 4,000 for a used EV. The purchase has to happen before September 30th of this year, so a couple of months. Lastly, it ends the US regulatory credits around vehicle emissions that automakers buy largely from Tesla. This is a significant and profitable revenue stream for EV makers that essentially is going away.

Matt Frankel: Jason, when you say renewables are being gutted, you're essentially referring to solar and wind, if I'm not mistaken. It's not gutting anything for nuclear power, correct?

Jason Hall: That's correct. These things you get are the pure renewables as we think of them.

Anand Chokkavelu: Let's put a fine point on this with specifics. Who are the relative winners and losers, Jason?

Jason Hall: This could be an hour long show, but I'll try to summarize it here. Thinking about the companies that are most directly affected, I think Canadian Solar, which is a large manufacturer of solar panels and energy storage, and they really largely target the utility market, but also residential is definitely a loser here. In the near term Sunrun, its business model is tied to these tax credits as an installer and to some degree, First Solar is also going to be affected. I don't think there's really any winners out of this when it comes to solar. But I think Enphase is probably still in a better position in the market may believe. Maybe First Solar as well. It's been through these battles before, and it has been a winner over the long term. If you look at wind, GE Vernova has been on a huge run. I love that business, but I don't love the stock right now. Tesla, I think maybe one of the bigger losers that investors haven't really considered. Last fiscal year, it earned 2.76 billion in revenue from regulatory credits. That's largely pure profit. Then there's also the loss of those EV tax credits for buyers. That might be offset from some incentives for US made autos that are part of the bill now that were part of the law, but I think this puts Tesla in a tougher spot. The tailwinds are not favorable for fossil fuels before this. This doesn't really change any of that. There's opportunities there, but not because of the law.

Matt Frankel: The reason I asked about nuclear a minute ago is because that's really what I see as the big winner here. I like some of the nuclear focused utility providers. Constellation Energy is one that comes to mind. One of their stated goals is to have the largest carbon free nuclear power fleet in the US by 2040. Jacob Solutions, they provide consulting and design services to the industry. Ticker symbol is J, so it's really easy to remember. They recently had some really big nuclear contract wins. I'm going to push back on Jason's Tesla as a big loser. One, they're American made cars. They qualify for that new auto loan interest deduction, so that could help offset what they're losing from the EV tax credits. They have a big energy storage business, and AI has not only giant power demands, but very variable power demands, and it's going to create a lot of need for large scale energy storage, and Tesla does that. I think they're worth watching.

Jason Hall: That's the one part of Tesla's business that's done extraordinarily well. Over the past few years, as the EV business has weakened, is that the battery business.

Anand Chokkavelu: Now quickly the big question, is solar still investable, Jason?

Jason Hall: I think so. We have a very US centric view, obviously, and the US is a massive important market for solar. But you look around the world and the regulatory environment is still largely favorable. I think if you're willing to write out plenty of volatility, that global opportunity is still really good. Businesses like Enphase, businesses like First Solar that have been through these battles before, and even a Canadian Solar, where it has a ton of projects that it's been funding to build on its books that the math just got changed for them in some big ways. The valuation is so cheap that I think that there's some opportunity there.

Matt Frankel: Taking a step back, the reason you have incentives for solar energy, for EVs, for all this, is because without them, they're not price competitive with the existing technologies. The gap has narrowed significantly, especially in solar over the past say 10 years as to the efficiency of the products themselves and just how much they cost. Eventually, solar is going to be able to stand on its own without incentives. But like Jason said, you have to be able to write out some volatility because that could be five years, that could be 10 years, that could be 20 years so eventually, it won't matter.

Anand Chokkavelu: After the break, we'll move from solar to something else that gets its power from the yellow sun. Stay right here. This is Motley Fool Money.

Welcome back to Motley Fool Money. I'm Anand Chokkavelu, here with Jason Hall and Matt Frankel. One of our Brothers Discovery's much anticipated latest reboot of Superman hits theaters on Friday. Hoping the Justice League can one day catch Disney's Marvel cinematic universe and hot on the heels of last week's Jurassic World Rebirth from Comcast. In honor of Summer movies, we're going to rank those three companies based on the value of their intellectual property. We'll throw in Netflix for good measure. Its headline this week was stating that half of its global audience now watches anime. Chokkavelu household certainly does with one piece. My kids have gotten me into it. For those unfamiliar, they have more episodes than the Simpsons. Matt, once again, your four choices are Warner Brothers Discovery. That includes the DC Universe, Superman, Wonder Woman, Green Lantern, Harry Potter, the Matrix, Looney Tunes, all our favorite HBO shows. You got Comcast with Shrek, Minions, Kung Fu Panda. You got Disney with Marvel, Star Wars, Pixar and Mickey Mouse. Finally, you got Netflix with things like Stranger Things, Bridgerton, Squid Game, newer Adam Sandler movies, and tons of niche content. Mentioned anime, you could argue whether that's niche content or not at this point. Whose intellectual property do you most value, Matt?

Matt Frankel: See, I said Disney. All four of these have excellent intellectual property, and I'll give you a more elaborate description there. In my household, you mentioned your household, how you have all these streaming things. We have a streaming service from all four of these. We have the Peacock service, which is a comcast product. We have HBO Max, which is a Warner Brothers discovery product. We have Disney Plus, and we have Netflix. Disney Plus also has Hulu attached to it. I ask myself, which is the least dispensable? I could cancel all the other ones before I'd be allowed to cancel Disney Plus for the other members of my household. Their film franchises are beyond compare. They have a much longer history of building intellectual property than all of these, especially in terms of valuables. Mickey Mouse is so old, it's not even intellectual property anymore. It's over 100-years-old, so I think it's actually in the public domain now. I have to say Disney, although it's a lot closer than I would have thought a few years ago.

Jason Hall: Yeah, if you had have asked me a few years ago, I absolutely would have said Disney, but I'm going to give the advantage to Netflix here. Let me contextualize that. I think the total value of Disney's IP is probably higher, but Netflix's ability to monetize it more effectively all over the world, I think, is even better than Disney's. I don't think any of these businesses in their studios have done a better job of making content that's relevant in more markets around the world than Netflix does. Let's be honest, I was able to watch Happy Gilmore with my eight year old son this weekend and I watched that on Netflix, that's bridging generations right there.

Anand Chokkavelu: Three things. One, Chokkavelu household is very excited for Happy Gilmore, too. Even my wife is in on it. Two, the Steamboat Willie era, Mickey Mouse is free to the world. The other ones aren't. I'm glad I'm not the only one with way too many streaming services, Matt. Let's talk about Last Place. Who are you cutting first, Matt?

Matt Frankel: Well, all those streaming services are still less than I was paying for direct TV a few years ago, so I think I'm doing all right. For me, the last place, it was between Comcast and Warner Brothers Discovery, both of which have amazing intellectual property, just to show you what a tight race this is. Comcast has universal. I was just in Orlando, and the universal theme parks are massive down there. But I have to put Comcast in last place. Just because Warner Brothers, I think the HBO Max acquisition was such a big advantage for them. They have some of the most valuable television assets of all time. More people watch the sopranos now than they did when it was originally on TV. It's a very valuable valuable asset, Game of Thrones. All these HBO shows that are among the highest rated shows of all time are part of their library. In addition to their film studio and all the other assets that we can't name because it's not that long of a show. I'd have to give Comcast last place, although, like I said, there's a good argument to be made for most of these to be in the top one or two.

Jason Hall: Yeah, I think that's fair. I agree with Matt that Comcast is the Number 4 here. But I don't think that's a flaw. It's just the nature of its business. About two thirds of its business comes from its cable subscriptions and high speed Internet. It's built differently than these other companies. I think it's fine that it's a little bit smaller.

Anand Chokkavelu: I will say, just to defend Comcast a little. I was thinking about my parents live in Florida, and it's high time we bring my two boys to Disney World or something like that. Honestly, the Universal theme park, the new one with Nintendo, Mario and the Harry Potter realm, it's close. We might we might prefer that one, but just to give a little love to Comcast and Universal. Jason Hall and Matt Frankel, we'll see you a little bit later in the show, but up next, we'll talk to the founder of one of the top five networks in the world, so stick around. This is Motley Fool Money. [MUSIC].

Welcome back to Motley Fool Money. I'm Anand Chokkavelu. Dave Schaeffer is the founder and CEO of Internet Service Provider Cogent Communications. Believe it or not, Cogent's the seventh successful company Dave Schaeffer has founded. Shaffer joined Fool analysts Asit Sharma and Sanmeet Deo to discuss how it deals with customers like Netflix and Meta platforms work and what keeps him up at night.

Asit Sharma: Well, hello, fools. I am Asit Sharma and I'm joined by fellow analyst Sanmeet Deo today, and our guest is Dave Schaeffer. Dave is CEO of Cogent Communications. He's also the founder of this company founded in 1999. Dave has grown Cogent Communications into a global tier one Internet service provider. It's ranked as one of the top five networks in the world. Dave is also a serial entrepreneur. He's founded six successful businesses prior to Cogent, and foolishly, he's also one of the longest serving founder CEOs in the public markets. We're delighted to have him with us today. Dave Schaeffer, welcome.

Dave Schaeffer: Hey, well, thanks for that great introduction.

Asit Sharma: To get started, let's jump in. Dave, for our members who might be unfamiliar with the ISP or Internet service provider industry, can you just explain what Cogent does and how it makes money?

Dave Schaeffer: Yeah, sure. Cogent provides Internet access to customers and to other service providers. I think virtually everyone uses the Internet, but rarely understands how it operates. Cogent has a network of approximately 99,000 route miles of intercity fiber that circumnavigates the globe and serves six continents. We then have an additional 34,000 route miles of fiber in 292 markets in 57 countries around the world. That network is solely built for the purpose of delivering Internet connectivity. When a customer buys Internet access, what they are really buying are interfaced routed bit miles connected to other networks. If you tried to sell a customer that they would have no idea what you're talking about. The average bit on the public Internet travels about 2,800 miles. It goes through eight and a half unique routers and 2.4 networks between origin and destination. Coaching carries approximately 25% of the world's Internet traffic on its network and has more other networks connected directly to it than any other network.

Asit Sharma: Yours is a primary network. Oftentimes, we hear of middlemen carriers in between ourselves sending that bit. Let's say I'm chatting with Sanmeet over Slack, sending him some bits as we have been exchanging through the day and him receiving that. But you are, I think we can think of Cogent as being the primary fiber that is the backbone of this information communication network, is that correct?

Dave Schaeffer: That is correct. We operate two very different customer segments, roughly 95% of our traffic, but only 37% of our revenue comes from selling to other service providers. We provide Internet connectivity to 8,200 access networks around the world and about 7,000 content generating businesses. Whether it be Bell Canada, British Telecom, China Telecom, Comcast or Cox. They could be customers of Cogent on the access side, where they aggregate literally billions of end users. Then on the other side, we sell connectivity to large content generating companies like Google, Amazon, Microsoft, and Meta, where they use us as their Internet provider. The second portion of Cogent's business is selling directly to end users. That represents about 63% of our revenues, but only approximately 5% of our total traffic. Cogent is an ISP, primarily in North America, where we connect to a billion square feet of office space, where we sell directly to end users. Then globally, we sell to multinational companies, oftentimes using last mile connections from third parties.

Asit Sharma: I always like to understand how exactly the companies I'm looking at make money. For example, for Netflix or Meta, or you pick a content provider, whoever it might be, when they work with you, explain that to me how they buy? Do they buy bandwidth in a package? Do they have a contract? How does that work? When they look to you to say, hey, we want to buy some bandwidth?

Dave Schaeffer: Yeah, so typically, we will provide them connections in multiple markets around the world. They will then have a minimum commitment level, and then above that, they pay on a metered basis. The way in which we bill is megabits per second at peak load over the course of the month. We bill at the 95th percentile, which means if you have a very spiky event that lasts less than 18 hours in a month, you don't pay for that incremental bandwidth but everything below that peak utilization, you pay a bill on a per megabit basis.

Dave Schaeffer: That is the way in which any service provider, whether it be an access network like Telkom South Africa, or a cable company like Rogers in Canada would buy from us. But for our corporate customers, the billing model is very different. For corporate customers, they typically buy in end user locations, not in data centers, and they are paying us a flat monthly fee for a fixed connection that is unmetered. I think of it as an all you can eat model.

Sanmeet Deo: There is a monthly recurring revenue that you get. It's just that with your network or your content customers, it could vary based on their usage. They could dial it up, dial it down, based on, like, this week, actually, they're dropping Squid Game, so they can anticipate they're going to need a lot of bandwidth versus maybe next month, their content late is a little lower, so they won't use up as much versus the corporate customers are paying more of a recurring, not based on volume. Is that accurate?

Dave Schaeffer: Is correct, Sanmeet. Virtually all of our revenue is predictable, even for those variable usage customers, there is oftentimes a very consistent pattern to their usage, and their bills do not vary by more than a couple percent month over month.

Sanmeet Deo: Dave, let's go on to looking at a review of recent performance. 2024 was a great year for Cogent. It crossed $1 billion in annual revenue. Can you just walk us through the highlights of your key business segments, wholesale, enterprise, net-centric? What drove the performance? Also did anything about the year surprise you as you went through it?

Dave Schaeffer: Two things. First of all our Internet based business represents 88% of our revenues across all three segments. We do derive about 12% of revenues from selling some adjacent services. Those being co location in our data center footprint. Optical transport or wavelength services and the leasing out of IPV4 addresses. We did generate about $1 billion in revenue in 2024 and 2024 was a year of significant transition for Cogent. Cogent had organically grown between 2005 and 2020 as a public company with no M&A at a compounded growth rate of 10.2% per year average over that period. We also were able to experience significant margin expansion during that period, where our EBITDA margins expanded at roughly 220 basis points per year over that same 15 year measurement period. When COVID hit, our corporate segment slowed materially because people were not going to offices, and as a result, Cogent's total growth rate had decreased to about 5% and our rate of margin expansion slowed to about 100 basis points. In May of '23, we acquired the former Sprint Long Distance Network, a Sprint Global Markets Group business from T-Mobile. That business was actually in decline and burning cash. In 2024, we significantly reduced that cash burn, and we were able to begin to repurpose some of the flow Sprint assets. In order to facilitate this transaction, T-Mobile paid us in cash over a 54 month period beginning in May of '23, $700 million. In 2024, a significant milestone for Cogent was our ability to take out much of that burn from that business and to actually accelerate the decline in that acquired business, as many of the products that were being sold or gross margin negative services.

Anand Chokkavelu: As always, people on the program may have interest in the stocks they talk about, and The Motley Fool may have formal recommendations for or against. Don't buy or sell stocks based solely on what you hear. All personal finance content follows Motley Fool editorial standards is not approved by advertisers. Advertisements are sponsored content and provided for informational purposes only. See our full advertising disclosure. Please check out our show notes. Up next, we've got stocks on our radar. Stay right here. You're listening to Motley Fool Money.

I'm Anand Chokkavelu, joined again by Jason Hall and Matt Frankel. This week's been Prime Day week invented out of thin air in 2015 to boost sales. It's almost literally become Christmas in July for Amazon, and to a lesser extent, all the imitating retailers. Got me wondering. Is this the greatest feat of something from nothing marketing we've seen? If not, what's competing with it, Jason?

Jason Hall: I think it's not even something from nothing. I think they stole this idea. Christmas in July has been around literally since the 1900. I think they're getting maybe a little bit too much credit for just being a really big retailer, smart enough to say, hey, we're doing a sale when there was nothing else going on, and people were like, oh, it's a big sale. Well, people kept coming, so it just gets bigger every single year.

Matt Frankel: Before e-commerce, Jason's right, remember the Sunday paper that had all the flyers from all the stores. They'd have their semi annual sales. The President's Day weekend sales were the ones I remember that were the biggest deals ever that really were just meant to invigorate sales in a historically slow time of year. But really, this concept has been applied over and over. Think of how many tourist destinations create random festivals in the worst months to go, like, weather wise. I used to live in Key West, Florida, and the biggest party of the year is called Fantasy Fest. It was created to invigorate tourism during hurricane season. It's a concept that's worked over and over, and this is a big one.

Anand Chokkavelu: Dan.

Dan Boyd: I just wanted to jump in here and mention Father's Day and Mother's Day. Surprised that you guys didn't mention those. We're all fathers here on the podcast, so I know that we enjoy Father's Day, but, like, come on. They're nothing. They were just created to sell stuff.

Anand Chokkavelu: You're not going to mention Valentine's Day, Mr. Grinch.

Dan Boyd: Valentine's Day has somewhat historical significance with all the St. Valentine's stuff. I didn't want to go too far into it in my grumpiness Anand, but I guess we can throw that one on the fire.

Anand Chokkavelu: Speaking of Singles Day in China. The Alibaba took that cemented in the '90s. I think less commercy, but then it became more commercy. Two other things, Sears' catalog. Let's not forget. A lot of times Sears really is the Amazon before Amazon we forget about it because we see it at its late phases. It wasn't the first catalog, Tiffany, Montgomery Ward, they beat it to the punch. But when it was going, it was called the Consumer Bible. Then on a smaller scale, I'll give one more. Just shout out to Spotify rapped. They do a wonderful job inventing a thing to get us more engaged. Let's get to the stocks on our radar. Our man behind the glass, who we just recently, Dan Boyd, is going to hit you with a question. We're more likely, historically, an amusing comment. Jason, you're up first. What are you looking at this week?

Jason Hall: How about Church and Dwight? Ticker C-H-D. I don't know if we give some of these legacy consumer brands companies enough talk. What's Church and Dwight? You've probably heard of Arm & Hammer baking soda. But they also own a lot of other retail brands. You might be familiar with Orajel, if you've ever had a sore tooth or you have a baby that kind of thing comes up. They own Trojan, which is another brand that people might be familiar with. But here's my personal. Right now, I have a cold. I'm living and functioning off of Zicam. That's a Church and Dwight product that's really getting me through. Over the long term, it's been a great investment. Over the past 10 years, the stocks returned about 10.5% in total returns. That's underperformed the market, but it's better than the market's long term average. I think there might be something there.

Anand Chokkavelu: Dan, a question about Church and Dwight?

Dan Boyd: Not really a question, Anand, but more of a comment. Jason, you forgot to mention OxiClean in the Church and Dwight product catalog here as a parent of a three-year-old and a nine month old laundry is a very important thing on our house, and I don't think we could survive without that OxiClean.

Jason Hall: I will raise your three-year-old and nine month old with an eight and a half year old who plays soccer. My house runs on that stuff. I'm with you there.

Anand Chokkavelu: Matt, what's on your radar?

Matt Frankel: Well, now what's on my radar is the OxiClean that I have in the closet right there. But as far as the stock, I'd have to say SoFi. Ticker symbol S-O-F-I. Fantastic momentum. They've done a great job of creating capital white revenue streams in recent years. The growth is actually accelerating. They recently announced they're bringing crypto back to their platform now that the banks are allowed to do so. That's going to be a big driver. Not only crypto, they're going a step further. They're going to start bringing blockchain facilitated money transfers across border for free. They have lots of big plans. They recently started doing private equity investing for everybody. Guys like you and me can invest in companies like SpaceX and OpenAI that are pre IPO through SoFi's platform through venture funds. There's a lot going on in this business, and it's still a relatively small bank, and they aim to be a Top 10 bank within the next decade.

Anand Chokkavelu: Dan, question about SoFi.

Dan Boyd: Well, absolute F to name. SoFi, just terrible. I feel like smart people like them could have come up with something better, but private equity investing is very interesting, Matt, though a little scared to me without the reporting regulations that public companies have to do.

Matt Frankel: I do think it was a natural thing, though, now that all these companies are waiting longer than ever to go public. SpaceX is a massive business. OpenAI has a, $100 billion plus valuation. There's a lot to like there and a lot of potential.

Anand Chokkavelu: Dan, which company you're putting on your watch list, OxiClean or private equity stuff.

Dan Boyd: I'm going to go with Church and Dwight for some of that beautiful OxiClean.

Anand Chokkavelu: That's all for this week. See you next time.

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Anand Chokkavelu, CFA has positions in Alphabet, Amazon, First Solar, Microsoft, Netflix, Salesforce, SoFi Technologies, Walt Disney, and Warner Bros. Discovery. Asit Sharma has positions in Amazon, Digital Realty Trust, Microsoft, Nvidia, Salesforce, Upstart, and Walt Disney. Dan Boyd has positions in Amazon and Walt Disney. Jason Hall has positions in Brookfield Asset Management, Brookfield Infrastructure, Brookfield Renewable, Enphase Energy, First Solar, Nvidia, SoFi Technologies, Upstart, and Walt Disney and has the following options: short January 2026 $27 calls on SoFi Technologies, short January 2027 $32.50 puts on Upstart, and short January 2027 $40 puts on Enphase Energy. Matt Frankel has positions in Amazon, Brookfield Asset Management, Digital Realty Trust, SoFi Technologies, Upstart, and Walt Disney and has the following options: short December 2025 $95 calls on Upstart. Sanmeet Deo has positions in Alphabet, Amazon, Netflix, and Tesla. The Motley Fool has positions in and recommends Alphabet, Amazon, Brookfield Asset Management, Constellation Energy, Digital Realty Trust, Equinix, First Solar, Meta Platforms, Microsoft, Netflix, Nvidia, Salesforce, Tesla, Upstart, Walt Disney, and Warner Bros. Discovery. The Motley Fool recommends Alibaba Group, Brookfield Renewable, Comcast, Enphase Energy, Ge Vernova, and T-Mobile US and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.

These 3 Technology Leaders, Up 36% to 69%, Have Soared Since Trump's "Liberation Day." Should You Buy Them Now?

Key Points

  • Palantir's growth is on fire, but investors may also wonder whether it can continue.

  • Reddit stock is once again surging, thanks to its growth and role within the AI ecosystem.

  • Netflix has become a cash cow, and the future remains bright.

The stock market has been somewhat of a roller coaster since President Donald Trump unveiled widespread tariffs on April 2, a day the administration called "Liberation Day."

After some extremely volatile market action, stocks have since stabilized and gone on to challenge new all-time highs. Technology stocks have helped lead the charge. Palantir Technologies (NASDAQ: PLTR) surged 69% since the announcement, followed by Reddit (NYSE: RDDT) at nearly 50% and Netflix (NASDAQ: NFLX) at 36%.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Learn More »

It's only natural to wonder whether stocks can sustain such impressive momentum.

Three contributing analysts from The Motley Fool tackled these leading technology names one by one to find out. Here is whether you should still buy these tech winners now.

A newspaper with a headline that says Stock Rally.

Image source: Getty Images.

Investors should weigh the valuation of this stock versus its growth potential

Will Healy (Palantir Technologies): Given the power of its Artificial Intelligence Platform (AIP), it may not surprise active tech investors that Palantir rose 69% since April 2.

That gain occurred as the power of its technology became better known to investors, and indeed, one does not have to look far to find AIP's success stories. One insurer reduced an underwriting workflow from two weeks to three hours, while a telecom company utilized it to save money by accelerating the process of decommissioning outdated technologies.

Palantir's financial results also seem to reflect its clients' successes. The company reported 39% yearly revenue growth in the first quarter of 2025, and its Q1 net income increased by 105% over the same period to more than $214 million.

Unfortunately, even with that gain, the company's financials may also indicate its stock is too expensive in the near term.

Palantir's trailing P/E ratio of just over 600 may give investors pause. Also, the forward P/E ratio of more than 230 confirms that the trailing earnings multiple is not an anomaly. The forward one-year P/E ratio, which measures the earnings multiple against next year's estimated earnings, is approximately 185, indicating that the current price already reflects its anticipated earnings gains years into the future.

Whether that valuation makes Palantir stock a "bubble" is a matter of debate. Bubbles are typically not apparent until after the fact, and one could argue that the power of Palantir's technology justifies the stock's valuation. Nonetheless, the chances of it being a bubble are high enough that investors should probably refrain from adding shares.

More importantly, investing is a personal endeavor. If such valuations keep you awake at night, moving your money to lower-cost investments may be a wise decision.

Shares of Reddit advanced by more than 300% since its debut in March 2024

Jake Lerch (Reddit): As of this writing, shares of Reddit have soared by nearly 50% since April 2. That's an excellent run; however, shares have performed even better when viewed on a longer time scale. Since Reddit stock debuted via an initial public offering (IPO) on March 21, 2024, it advanced by more than 300%.

So, what's behind this big move? In short, it's down to Reddit's combination of growth and its role within the artificial intelligence (AI) ecosystem.

Let's start with its growth. After years of existence as a privately held company, Reddit's debut on the stock market brought about a change in its business model. The company increased its efforts to grow its user base, lure advertisers, and increase its revenue.

In its most recent earnings report (for the three months ended March 31, 2025), Reddit reported 108 million daily average users (DAUs), up 31% from a year earlier. While those figures are impressive, Reddit still has plenty of room to grow. Meta Platforms, for example, boasts over 3.4 billion DAUs.

As Reddit scales its user base, revenue -- specifically advertising revenue -- should scale along with it. The company reported $392 million in revenue for the first quarter, up 61% year over year.

Yet, there is a second factor that has analysts and investors excited about Reddit. It is an under-the-radar AI stock. Here's why.

One of Reddit's most valuable assets is the endless stream of content that its user base produces minute by minute. That content is pure gold to AI developers, who are eager to feed it to their AI models, whether the content is scholarly articles on particle physics, silly cat memes, or anything in between. In short, the more data an AI model has access to, the better its output will be.

In turn, Reddit could strike deals to license its content to AI companies. It already has one such deal in place with Alphabet, but additional -- and more lucrative -- deals could follow.

In summary, Reddit's stock is once again surging. Growth-oriented investors would be wise to consider owning shares of Reddit now and for years to come.

Netflix has matured, but the stock still has more to give investors

Justin Pope (Netflix): One stock that continually catches my eye is Netflix, the world's leading streaming service.

The company's journey to the top of the streaming mountain has yielded impressive investment returns; the stock has risen by over 104,000% since 2022. And yet it continues to deliver for shareholders, including roughly 36% returns since Trump's "Liberation Day" announcement three months ago.

Netflix is a different business than it once was. Not only did it transition from disc rentals to a digital platform, but it also invested billions of dollars in developing a catalog of original content, thereby eliminating the need to license shows and movies from its competitors. Today, that strategy is paying massive dividends. Netflix's profit margins have soared over the past decade, since its revenue growth began overtaking the company's content budget:

NFLX Profit Margin Chart

NFLX Profit Margin data by YCharts

Netflix is a massive company today, worth a whopping $548 billion. Such a large stock won't replicate those prolific past returns. Nevertheless, the company still has room to grow. Its paid subscriber count increased by over 15% year over year in Q4 2024, ending the year with more than 301 million paid subscribers.

Analysts estimate that Netflix will grow its earnings by an average of almost 22% annually over the next three to five years. The stock isn't a bargain, now trading at 51 times 2025 earnings estimates, but it's a reasonable entry point for investors looking to buy, hold, and let Netflix continue to do its thing.

Should you invest $1,000 in Palantir Technologies right now?

Before you buy stock in Palantir Technologies, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Palantir Technologies wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $671,477!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,010,880!*

Now, it’s worth noting Stock Advisor’s total average return is 1,047% — a market-crushing outperformance compared to 180% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of July 7, 2025

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Jake Lerch has positions in Alphabet and Reddit. Justin Pope has no position in any of the stocks mentioned. Will Healy has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Meta Platforms, Netflix, and Palantir Technologies. The Motley Fool has a disclosure policy.

10 Stock Splits Investors Could See Happen in 2026

Key Points

Stock splits are less common than they used to be, as fractional shares have negated their effect. However, fractional shares aren't available to every investor, especially outside the U.S. Still, stock splits have their uses, namely for employee compensation.

Stock splits can still be exciting for investors and may sometimes cause a stock to surge. With a few potential splits expected next year, now may be a great time to acquire these stocks that are ripe for a split.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue »

Person celebrating in their office.

Image source: Getty Images.

Microsoft

Microsoft (NASDAQ: MSFT) may not appear to be a top stock-split candidate, but it might be compelled to split its stock. Although its share price is roughly $500, which isn't at a level you'd expect from a stock split, it is a member of the Dow Jones Industrial Average, a price-weighted index.

This means that the index is weighted by a stock's price rather than by the company's size. Currently, Microsoft is the second most expensive stock in the index, and it may be forced to split its stock to stay in the index. Otherwise, it could throw the index out of balance.

As a result, investors shouldn't be surprised if Microsoft splits its stock next year.

Goldman Sachs

Goldman Sachs (NYSE: GS) is also a member of the Dow Jones Industrial Average, but it holds the title of the most expensive stock in the index, trading for more than $700. Like Microsoft, it may split its stock next year, making it a smaller component of the widely used index.

Meta Platforms

Meta Platforms (NASDAQ: META) could be vying for a position within the Dow as the index transitions from older manufacturing companies to newer AI-focused ones. This represents the broader shift in the American economy, so the inclusion of a company like Meta makes sense.

With the stock currently trading at around $725 per share, it's a stock that could potentially undergo a split next year.

Berkshire Hathaway

It's unlikely that you'll see a Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B) Class A share split, given that the stock price is currently more than $700,000 per share. However, Warren Buffett is retiring at the end of the year, and with a new CEO at the helm, you never know what might happen.

The B-class shares, which are significantly more affordable at $477 per share, could be a candidate for a stock split next year. Berkshire Hathaway is a world-renowned company, and maintaining affordable access to its shares is likely a key point for management.

Costco

Costco Wholesale (NASDAQ: COST) experienced an impressive stock run over the past decade, with its stock price exceeding $1,000 per share, although it's currently slightly below that mark. Once a company reaches $1,000 per share, it lands on investors' radar as a stock-split candidate, so don't be surprised if you see Costco announce a stock split sometime in 2026.

Netflix

Netflix (NASDAQ: NFLX) is in a similar boat to Costco but at an even more expensive level. Its shares trade for around $1,250, which is quite expensive for a tech stock. Many tech companies use stock options to compensate employees, which would be a very expensive bonus to hand out from Netflix, given the high price of their stock.

As a result, I think it could split its stock in 2026.

ASML

ASML (NASDAQ: ASML) currently trades for approximately $800, but its 52-week high was over $1,100. This critical semiconductor manufacturing equipment supplier is poised for strong growth over the next few years as chip production capacity increases, and the company may consider splitting its stock in anticipation of further market run-up.

ServiceNow

ServiceNow (NYSE: NOW) trades for around $1,000 and is benefiting from the integration of AI into business. The stock has been on a remarkable run over the past few years, and it could see its shares rise even further, making it a potential candidate for a stock split.

Fair Isaac Corporation

Fair Isaac Corporation (NYSE: FICO), better known as FICO, is the company behind credit card scores. Its stock has been a stellar performer, crushing the market on its way up to more than $1,600 per share. However, it decreased significantly from its 52-week high of $2,400.

Still, given the stock's high price, don't be surprised if it announces a split next year.

MercadoLibre

MercadoLibre (NASDAQ: MELI) is a Latin American e-commerce and fintech giant. It has built a massive empire in Latin America and continues to expand rapidly. Its run has taken it to a $2,400 per share stock price, and it could be a company that's ripe for a stock split in 2026.

Even if none of the companies on this list fail to split their stock, some of them appear to be strong investment candidates. Although an impending stock split could be a part of the investment thesis, there should be a compelling investment case for each company beyond a stock split.

Should you invest $1,000 in Microsoft right now?

Before you buy stock in Microsoft, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Microsoft wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $671,477!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,010,880!*

Now, it’s worth noting Stock Advisor’s total average return is 1,047% — a market-crushing outperformance compared to 180% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of July 7, 2025

Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Keithen Drury has positions in ASML, MercadoLibre, and Meta Platforms. The Motley Fool has positions in and recommends ASML, Berkshire Hathaway, Costco Wholesale, Goldman Sachs Group, MercadoLibre, Meta Platforms, Microsoft, Netflix, and ServiceNow. The Motley Fool recommends Fair Isaac and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.

Dinosaurs Roar for Comcast; CoreWeave Goes Shopping

In this podcast, Motley Fool Chief Investment Officer Andy Cross and senior analyst Jason Moser discuss:

  • Jurassic World Rebirth delivers for Comcast.
  • CoreWeave finally gets it done for Core Scientific.
  • Oracle makes a deal with the federal government.
  • Two stocks to look at if the market pulls back: Samsara and Howmet Aerospace.

To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. When you're ready to invest, check out this top 10 list of stocks to buy.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue »

A full transcript is below.

Should you invest $1,000 in Comcast right now?

Before you buy stock in Comcast, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Comcast wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $694,758!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $998,376!*

Now, it’s worth noting Stock Advisor’s total average return is 1,058% — a market-crushing outperformance compared to 180% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of July 7, 2025

This podcast was recorded on July 07, 2025.

Andy Cross: Dinosaurs roar for Comcast while CoreWeave makes an acquisition. Motley Fool Money starts now. Welcome to Motley Fool Money. I'm Andy Cross, joined by Motley Fool's Senior Analyst and advisor Jason Moser. Jason, happy Monday.

Jason Moser: Happy Monday, AC. Good to see you.

Andy Cross: Good to see you. Thanks for being here. We got confirmation today that CoreWeave is buying another AI Data Center company, and Oracle is cutting cloud prices for Uncle Sam. We'll also talk about two companies we're keeping an eye on if the price is right. But, Jason, let's start with the summer movies, Universal's Jurassic World Rebirth reportedly brought in more than 300 million globally this weekend, giving a nice wind to Comcast, the parent owner of Universal. This continues that strong summer at the box office that included how to train your dragon also from Universal and Apple's F1. Jason, is this good news for long suffering Comcast shareholders like me?

Jason Moser: [laughs] It's not bad news. Most certainly it's not bad news. Now, Comcast content and experiences studio segment brought in $11 billion in revenue in 2024, along with about $1.4 billion in operating profits. This isn't something from the revenue side that is a tremendous needle mover, but maybe it's a needle mover to the extent that we would say the same thing for Disney. This is the content space that can be very lumpy some years are better than others. If you look at the same segment, the content and experience, the studio segment, we talked about $11 billion in revenue in 2024. That was $12.3 billion in 2022. It ebbs and flows. But this is terrific news. I'm amazed. The original Jurassic Park came out back in 1993. They have pulled a Disney to an extent and have really expanded and stretched out this IP library. I think that is a good sign for Comcast shareholders.

Andy Cross: Jason, 100%. I see this again, this Comcast stock has not done that well over the past couple of years. It now yields about 3.7%. Of course, we have the spin off, the spin out of the media properties called Versant later this year, where they're going to spin off CNBC and USA, MSNBC, the Golf Channel, and a few other properties. I think that's got a lot of investors interested in Comcast, at least for me, those of us who own it. But this is the seventh film franchise of the Jurassic franchise, and that franchise is worth about $6 billion. It is a Disney play, Jason, because they're using that in their IP. They're using the theme parks. I saw promotions all around the world, all around the cable properties for the Jurassic rebirth movie. They were showing older Jurassic movies on some of those cable properties this weekend. I think from that perspective, it does help build that franchise out, and it's going to be a very competitive summer. Disney itself has its fantastic four coming out this summer. We have the much anticipated Superman movie from Warner Brothers coming out this year, but I think it does help build out that franchise that has become more and more valuable to those universal theme parks, including the one that just opened up this year.

Jason Moser: No question. This also plays into that summer blockbuster. We always look to see what the summer blockbusters are going to be. I just think it's noteworthy these results, particularly given the tepid reviews that the movie's gotten. I haven't seen it, and I take criticisms with a grain of salt, but 51% on rotten tomatoes and a cinema score of B from the opening weekend audience. That's not lighting the world on fire from a critics perspective, but clearly the audience loved it.

Andy Cross: Also, Jason, interesting notes over the weekend that Netflix, with its 300 million subscribers, they said at the Anime Expo in Los Angeles this weekend that more than half its subscribers now watch Japanese anime. I found that interesting just because it continues to show the power of the Netflix globally as a brand, and one reason why they're along with YouTube, one of the most valuable media properties out there.

Jason Moser: We've always said they do such a good job with that data. Personally, I'm not an anime consumer, but I think this is a great example for investors, where it's not necessarily wise to extrapolate one personal taste into a potential idea, just because it's not something that you like or eat or watch, it doesn't mean there isn't an opportunity there, and that 50% number globally, really does tell us something impressive about Netflix's market position.

Andy Cross: 100%. When Motley Fool Money returns, CoreWeave goes shopping.

AI infrastructure company CoreWeave announced that it will buy Core Scientific for around $9 billion in an all stock deal. That's about $20 per share based on CoreWeave stock. Now, shares of Core Scientific Jason are down around 20% today to about 15, so the market's sensing something here.

Jason Moser: This is an arms race like we haven't seen in some time. Companies are just rushing to build out their AI capabilities, and this is just another sign of that. But I think it's really noteworthy that Core Scientific shares being down so much today. There can be a number of reasons why something like that might happen. Investors don't think that it will go through, perhaps another bidder comes in. But, AC, I wonder if this doesn't have something to do with the deal structure itself and what it's saying about the market's perspective on CoreWeave, because that nine billion number that's being bandied about, let's make sure we understand. That's just based on the July 3rd share price. Core Scientific shareholders are going to receive 0.1235 shares of CoreWeave for each share of Core Scientific that they hold. But as noted in the release, and this is important. The final value will be determined at the time of the transaction closed. That's not until later in Q4, so I don't know. Do you think this is like a glass half empty view on CoreWeave and whether they can hold their valuation? Because the stock has been on fire since it went public.

Andy Cross: It went public just this year, and the stock's done just fantastically well, and Core Scientific has done very well, although it has a little spotted history. It's one of those sparks back in 2021 that when it came public out there was about $4 billion, and it basically lost almost 100% of its value, had to declare bankruptcy, defile from the markets, came back to the public markets in January 2024. Actually, CoreWeave tried to buy them last year for about $6 per share. Now they're paying far more for that. It does give CoreWeave the vertical integration, Jason, that I think that they need to build out. They're going to add 9 or 10 AI data centers of Core Scientifics give them massive gigawatts of capacity. As CoreWeave is trying to build out its own AI data centers, it does need to continue to build out that capacity. CoreWeave is Core Scientific's largest tenet, so it makes sense from a vertical integration perspective. But I think the market is just saying with a share issuance, so soon after CoreWeave became public, there are some doubts about at what price they're going to have to get Core Scientific into the CoreWeave family.

Jason Moser: Exactly. I certainly understand the market's enthusiasm around CoreWeave. When you're selling yourself as the AI hyperscaler. There is something to that, and this is clearly a company that's playing a big role in the space. They just reported revenue growth, 420% in this most recently reported quarter. But again, and you're right, vertical integration, this is going to be something that really gives CoreWeave more power over its platform and to that power. This is a power play. Through this acquisition, CoreWeave is going to own approximately 1.3 gigawatts of gross power, along with the opportunity of one plus gigawatts of potential gross power available for expansion. A gigawatt is a lot of power, AC. That power is a medium sized city, and you think about the Hoover Dam. Hoover Dam, one of our biggest hydroelectric generators here in the country. That's responsible for about two gigawatts of capacity. You can see how this could really impact CoreWeave if it goes through.

Andy Cross: Prediction time, do you think it's going to go through? Do they have to lower the price, readjust the deal terms? You think, Jason?

Jason Moser: I think it's going to go through. I think that probably the market's enthusiasm is going to remain for Core. You think the stock will ebb and flow here a little bit. My suspicion is it'll go through. Probably not going to end up at that $9 billion valuation at the end of the day because that is pretty extreme for a company like Core Scientific. That's like 18 times full year revenue in 2024. We might see some change in the price there, but my suspicion is it'll go through.

Andy Cross: There's definitely some synergies there and some cost savings, but I think it'll go through, too, but I do think they'll have to readjust the terms.

Jason Moser: [laughs] Exactly.

Andy Cross: Next up on Motley Fool Money, Oracle gives Uncle Sam a deal. Let's move over to news that Oracle is cutting cloud service prices for the US government by as much as 75% as reported this weekend by the Wall Street Journal. Jason, who's a winner here? Is this an Oracle beneficiary, a US federal government beneficiary or a little bit of A, a little bit of B?

Jason Moser: I'm going to walk the fence here and say a little bit of A, a little bit of B. It does feel like both win somewhat here. This feels a bit like taking a page out of the book of Bezos. He was always known for driving down those prices in so many cases. He's got that quote, "Your margin is my opportunity." He's taking that Uber long-term view. AC, I think for federal agencies, they're under this mandate to modernize while also managing tighter budgets at the same time. So the old saying cash is king, I think, in this case, it seems maybe cost is king, and we're seeing other cloud providers follow the same lead, Salesforce has done the same thing in regard to Slack, Google, Adobe. This isn't anything necessarily new. But then I think for Oracle, these discounts can help lock in really multi year contracts. That offers more stability for their business model and revenue prediction. If they can extend those relationships, then you can start talking a bit about maybe exercising a little bit more pricing power down the road if they do a good job. I can see both parties benefiting from that.

Andy Cross: I thought this was a little bit more beneficiary for Oracle when I first started studying it. But then I think the GSA, the General Services Administration is starting to shake their big stick here to try to get some pricing out of some of these big players. It is interesting to me that this is for the licensees, not really for the subscription, and it goes through November. The pricing option goes through November of this year. It does give Oracle a foot in. It's really the first deal the GSA cut for government wide solutions, including lots of areas where Oracle and other cloud titans provide some of those services and compete very heavily. I think it's just more evidence of CFO Safra Catz, becoming more and more competitive, trying to push Oracle into markets. Clearly Oracle has had some nice beneficiaries here in the markets and in their business as the stock is gone really well. It's up 60% the past year or 40% year to date, Jason. It's north of a $600 billion company. Thirty five times earnings. That's almost two times its five year average. What do you think about Oracle, the stock going forward?

Jason Moser: I'm glad you brought that up. It does seem like a little bit of a richer valuation, but going back to Safra Catz, he's looking at fiscal 2026 targets here, cloud revenue growth projected to grow from 24% to over 40%. Then that IAAS, that infrastructure as a service. That growth there is projected to hit about 70%. Anytime you see valuations like that, you have to just step back and say, why is the market doing that? Where's the growth? I think that's where they're seeing some of that growth. Now they just have to deliver.

Andy Cross: I think so, too. I do, again, like this licensing play because as they continue to push more subscription, this does get into the core part of what Oracle has done for so long and done so well for so many years. I think it is a nice foothold for Oracle. I guarantee that GSA is going to be issuing lots of different pricing asks of lots more providers as they continue to manage their own footprint as they push toward to be a little bit more technological savvy at the federal government. Finally, today, Jason, stocks are down a little bit, but passed through all time highs last week. Let's end things with two stocks that we're keeping fresh on our watch list if the prices are right. What are you looking at?

Jason Moser: Everybody loves stock ideas, AC?

Andy Cross: Of course.

Jason Moser: One that I just continue to keep my eye on is a company called Samsara. Ticker is IOT. It's now a $22 billion company, and Samsara operates its Connected Operations Cloud, which is a software platform that connects all of the devices that a company has and its buildings, its equipment, its cards, and other facilities. The platform then establishes this massive network of data and information specific to that company. Now the company's still working its way to profitability. Technically, it's cash flow positive, but stock-based compensation more than eats that up, which isn't uncommon for a company at this stage of its life cycle. It's around 14 times forward sales projections today. Now, when I wrecked this company in the trend service back in the beginning of 2023, it was at 13 times. It's been a bit of a bumpy ride, and the stock has pulled back a little. But when you look at the fundamentals of this business, they just reported first quarter results that exceeded all targets that leadership set a quarter ago, revenue up 32% annualized recurring revenue up 31%. They have 2,638 customers with ARR over $100,000. That's up 35% from a year ago. It is a company that continues to grow and establish a fairly dominant position in its market is what it seems. It really does seem like this is becoming the top dog at its space. I think it's also a company that possesses a lot of those hidden gems traits.

Those principles that our CEO Tom Gardner loves, he's so fond of. You get reasonable, remarkable growth into expanding markets, check. Led and owned by true long-term believers in the company, check. This is a company that is led by co-founders Sanjit Biswas and John Bicket. They own almost 70% of the voting power in a relentless curiosity toward bold technical exploration. That is a double check for a company like this. If we ever see any material pullback in this one, I certainly would be very tempted to add it to my portfolio.

Andy Cross: Jason, do you have any thoughts on these cute ticker names, IOT? [laughs] Does that tend to scare you away from a company?

Jason Moser: Not really. I never would recommend a company on the ticker alone, but you just made me think of core scientific and its ticker cores. It's like the smoky and the bandit ticker. It's funny to see those sometimes.

Andy Cross: Jason, I'm looking at Howmet symbol HWM. It's formerly part of Alcoa. Its history is steeped into high precision metalworking, 90%. It provides 90% of all structural and rotating aero engine components for the aerospace, transportation, and energy markets. These are really super high end precision airfoils and forging, forge wheels and chassis for the commercial trucking and auto space. The stock has doubled over the past year, and it's up almost 50% since the Rule Breakers team over in Stock Advisor, we recommended it just this year. It has these really serious competitive advantages that we love to see. Its patents, manufacturing, the history behind it, its core clients. You don't really want to mess around with replacement parts for these kinds of really high precision manufactured items. It does have some opportunities in the energy space because it provides the blades for the engine turbines that power a lot of the energy that goes into supporting data centers. I do love this business.

It's just the stock has done so well, and while the Stock Advisor team, as well as our Rule Breakers team love buying into strength, I just want to see, I'm not going to criticize anybody for adding this great business to their portfolio. But for me, I'm just looking for a little bit of maybe a market breather before I start looking at Howmet symbol HWM just a wonderful business, $73 billion. It's not small, and it has a lot of room to grow in the aerospace market.

Jason Moser: Plenty of examples in my investing life where patience tends to pay off.

Andy Cross: 100%. [laughs] There you have those two high quality companies in Samsara and Howmet that we're watching. If the markets go on a little bit of a tailspin here in the dog days of summer, maybe they go added to our portfolio. That's a rap for us today here at Motley Fool Money. Jason Moser, thanks for joining me here.

Jason Moser: Thanks for having me.

Andy Cross: Here at the Motley Fool we love hearing your feedback, to be part of that feedback or to ask a question, email us at [email protected]. That's [email protected]. As always, people on the program may have interest in the stocks they talk about and the Motley Fool may have formal recommendations for or against. Don't buy or sell stocks based solely on what you hear. All personal finance content follows Motley Fool Editorial standards and is not approved by advertisers. Advertisements are sponsored content and provided for informational purposes only. To see our full advertising disclosure, please check out our show notes. For all of us here at Motley Fool Money, thanks for listening, and we'll see you tomorrow.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Andy Cross has positions in Adobe, Alphabet, Apple, Comcast, Netflix, Salesforce, and Warner Bros. Discovery. Jason Moser has positions in Adobe and Alphabet. The Motley Fool has positions in and recommends Adobe, Alphabet, Apple, Netflix, Oracle, Salesforce, and Warner Bros. Discovery. The Motley Fool recommends Comcast, Howmet Aerospace, and Samsara. The Motley Fool has a disclosure policy.

2 Stocks to Buy With $5,000 and Hold for a Decade

Key Points

  • Netflix and Roku are longtime streaming leaders with excellent prospects.

  • Both companies should benefit as streaming viewing hours increase.

  • They can deliver above-average returns over the next decade.

Streaming giants Netflix (NASDAQ: NFLX) and Roku (NASDAQ: ROKU) have a lot in common. The former was an early investor in the latter. They both dominate their respective niches in the streaming industry and have produced market-beating returns over the long term.

Here's one more thing Netflix and Roku have in common: excellent long-term prospects that could lead to substantial gains over the next decade. Here's the bull thesis for these market leaders.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Learn More »

1. Netflix

Netflix has been firing on all cylinders thanks to its excellent financial results. In the first quarter, the company's revenue increased by 12.5% year over year to $10.5 billion. Netflix's earnings per share of $6.61 was up 25%, while its free cash flow came in at $2.7 billion, 24.5% higher than the year-ago period.

A couple watching TV.

Image source: Getty Images.

Netflix is posting strong financials despite mounting competition in the streaming industry, which some thought would eventually erode its market share. But as evidence of the strength of its brand power, the company recently increased its prices once again. Netflix's ability to thrive even as new streaming services keep popping up says a lot about its prospects.

Streaming still has significant room to grow as the switch from cable continues. The company estimates a $650 billion revenue opportunity, which dwarfs its trailing-12-month revenue of $40.2 billion.

Over the next decade, it could make significant headway into this enormous, untapped potential. If Netflix can grab 10% of its total addressable market, its top line should grow at a good clip through 2035. The company's strategy to achieve that feat should remain the same: Create content that viewers love to watch and that spreads through word of mouth, leading to more paid subscribers on its platform, more data to help guide content production, and even better content.

A wonderful network effect has powered Netflix's success for a while now. There will be some challenges, including more competition and economic issues that might make people hesitant to put up with its price hikes, among others. However, Netflix has consistently demonstrated its ability to perform well despite these challenges, and I expect the company to continue doing so over the next decade.

The stock is still worth buying after the impressive run it has had over the past year. With $5,000, investors can afford three of the company's shares.

2. Roku

Roku's platform enables people to access most of the major streaming services, making the company's ecosystem an attractive hub for advertisers to target consumers. That's how Roku makes the lion's share of its revenue. Although it has encountered some headwinds in recent years -- including a slowdown in ad spending and declining average revenue per user (ARPU) -- Roku has somewhat recovered over the trailing-12-month period.

In the first quarter, the company's revenue increased by 16% year over year to approximately $1 billion. Roku's streaming hours were 35.8 billion, 5.1 billion more than the year-ago period. However, Roku remains unprofitable, although it is also making progress on the bottom line. The streaming leader's net loss per share in the period came in at $0.19, much better than the $0.35 reported in the prior-year quarter.

Although long-term investors may be concerned about the persistent red ink on the bottom line, recent developments show why Roku is a promising stock to hold onto. The company signed a partnership with Amazon, another leader in the connected TV (CTV) space. The two will grant advertisers access to their combined audiences, comprising 80 million households in the U.S. and more than 80% of the CTV market, through Amazon's demand-side ad platform.

This initiative will give advertisers far more bang for their buck, as early tests of the integration show. It also highlights the value of Roku's ecosystem, the leading one in the CTV space in North America. Over time, the company's platform will attract more advertising dollars, especially as streaming viewing time continues to increase. That's why investors should look past the red ink, for now. Roku's long-term prospects remain intact.

Even its ARPU decline in recent quarters was due to its focus on expanding its audience in certain international markets; it is still early in its monetization efforts in those regions. As Roku's initiatives in these places ramp up, while the company continues to make headway in more mature markets, Roku should eventually become profitable and deliver strong returns along the way.

The stock is worth investing in today for the next decade, and $5,000 is good for 56 shares of the company with some spare change.

Where to invest $1,000 right now

When our analyst team has a stock tip, it can pay to listen. After all, Stock Advisor’s total average return is 1,060%* — a market-crushing outperformance compared to 180% for the S&P 500.

They just revealed what they believe are the 10 best stocks for investors to buy right now, available when you join Stock Advisor.

See the stocks »

*Stock Advisor returns as of June 30, 2025

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Prosper Junior Bakiny has positions in Amazon. The Motley Fool has positions in and recommends Amazon, Netflix, and Roku. The Motley Fool has a disclosure policy.

Earning Attention With Seth Godin

AI, marketing, brand, creativity, These are just a few of the subjects that Seth Godin can talk about with eloquence and insight. In this episode of Rule Breaker Investing, the Purple Cow author joins Motley Fool co-founder David Gardner and guest host Andy Cross, The Motley Fool's chief investment officer, to shed light on what earns attention, transaction, and loyalty.

To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. When you're ready to invest, check out this top 10 list of stocks to buy.

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A full transcript is below.

Where to invest $1,000 right now

When our analyst team has a stock tip, it can pay to listen. After all, Stock Advisor’s total average return is 995%* — a market-crushing outperformance compared to 172% for the S&P 500.

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*Stock Advisor returns as of June 9, 2025

This podcast was recorded on May 21, 2025.

David Gardner: This week a special treat. Seth Godin, only on this week's Rule Breaker Investing.

Among the many remarkable traits of Seth Godin, one of my favorites is the power of his brevity. In honor of Seth, you just got the shortest cold open I've ever done. This week, I'm featuring our recent Motley Fool interview from Fool24. That's the video channel on our website with superstar business author Seth Godin, joined by Andy Cross, as well, our Chief Investment Officer, that interview is coming right up. But first, a quick reminder next week is your mailbag. I love receiving your thoughts and questions every month. Reach us at [email protected] or tweet us at RBI podcast.

As I shared at the start of the year, my 2025 book, Rule Breaker Investing is now available for pre-order. After 30 years of stock picking, this is my magnum opus, a lifetime of lessons distilled into one definitive guide, and each week until the book launches on September 16, I'm sharing a random excerpt. I crack open the book to a random page and read a few sentences. Let's do it. Here's this week's Page Breaker preview a succinct Godin-like statement, summing up my investing approach in exactly 20 words. I quote. "I try to find excellence, buy excellence, and add to excellence over time. I sell mediocrity. That's how I invest." That's this week's Page Breaker preview to pre-order my final word on stock picking shape by three decades of market crushing success. Just type Rule Breaker Investing into amazon.com, Barnes and Noble.com, or wherever you shop for great books. When you think about it, a great investment book literally pays for itself, and then some. To everyone who's already pre-ordered, thanks. That means a lot to me. In the words of the poet, Taylor Allison Swift, our next guest is feeling 22. Seth Godin has 22 best sellers in 39 languages. He's an Internet entrepreneur, best-selling author, renowned speaker and marketing. Sure, expert. He's posted more than 9,000 times on his blog, and his 22 books, I think I have that number right. He can correct me if I'm wrong. It'll destroy the Taylor Swift opening if I don't have that right, Andy. His 22 books include The Dip, Linchpin, Purple Cow, and Tribes. I want to throw Free Prize inside in there as well, book I love. His newest book is the best seller, This is Strategy Make Better Plans, published last year. He's one of the two most famous people from Mount Vernon, Virginia. Seth Godin, welcome back.

Seth Godin: You guys, you're great. David, you're a genius. I'm from Mount Vernon, New York, but I'll take it.

David Gardner: I rarely do this step. I'm going to throw my producer Mac Greer under the bus for, I would say, inadequate research that caused me to make, What is an embarrassing gas?

Seth Godin: It's not embarrassing. I just don't want to take any credit for being from a place I'm not from and move people from Virginia down the ladder. It's not fair. [laughs].

Andy Cross: It's all in the storytelling, anyways, Seth.

David Gardner: Seth, let's go right to AI because how can we not? Seven years ago, you joined me on my podcast. You were my first ever author in August. It was August 1st, 2018, and you described daily blogging back then as the best way to sharpen your thinking. Today, so many creators lean on AI assistant like ChatGPT to draft, edit, spark ideas. How has AI changed your own writing process, Seth, if at all, and what would your advice be to someone who worries that AI will cheat their way to insight?

Seth Godin: Let's say it's 1,900, 1905, and we're talking about electricity. I think it's a little bit of a trap to ask about, are you using a light bulb at night to help you type? Because electricity opened the door for so many miracles that we had no idea were coming. Claude is one of my closest compatriots. I find ChatGPT to be arrogant and lazy, but Claude and I get along great, and I never ask it to do my writing for me, but that's a personal choice because I write because I want to, not because some teacher told me I had to. What I do with Claude that continually amazes me are two things. First, is if you have a complicated document, 30, 40 pages, I had one that was written by 10 different people over the course of a year, and you upload that document and say to Claude, "Please find the internal inconsistencies, please ask me five hard questions, please criticize the structure," it will write you a two page memo better than most humans could do. The second thing I use it for is, I'll come up with a list of three or four or five things and say, "Give me four more." Of the four it gives me, at least two of them are things I never thought of that are really important. This idea of, did I think of all the things on my list, is great, but, two years from now, both of these uses are trivial compared to what AI is going to be doing to our lives.

David Gardner: Do you want to make any predictions, Seth?

Seth Godin: My prediction is this. Everything AI has done so far for the typical person in business in the developed world is solo. It's me and the AI. But the Internet has two words in it, Inter, which means connected and net, which means connected. That's what fuels everything that works on the Internet. Once AI says to me, "I noticed you were writing X, Y or Z, David, who's also using the same tool is working on the same thing. Should I connect you guys?" Whoa. What happens when my databases talk to each other or my databases talk to your databases? What happens when we create this amplification of community, not just amplification of knowledge? That adds two zeros, I think, to the way the world works.

David Gardner: Seth, you've written about how true pros don't fear amateurs, but I think a lot of pros are fearing ChatGPT, generative AI, Claude, whatever it is. Should we?

Seth Godin: Well, I've had technology put my projects out of business before, and it will do it again. What I mean by true pros, don't fear amateurs, when the camera came along, a whole bunch of people who were painters poo putt it. When the iPhone came along, wedding photographers freaked out. How dare guests at a wedding take pictures? Don't they know how hard I work to get all this fancy equipment? But the best wedding photographers got busier after that, not less busy because you're now charging for something that's not a commodity. If you made a living doing genre covers for science fiction novels, you don't have a job anymore, because if there's a genre, AI can do it better than you can. What it does is it requires you to go beyond genre and to be on the frontier. If I think about something like radiology, there are plenty of professional radiologists, but they're doing genre radiology by the book. Now an X-ray machine can instantly and for free, read a wrist fracture 95% of the time. I don't need a mediocre radiologist ever again. This is great news because now the 90% of the population that didn't even have access to X-rays and is going to. It's really bad news if you're by the book anything, and so that's what I mean by being a professional is you're not just checking the box and handing in the form.

David Gardner: Such a good distinction. Let's talk a little bit more about AI. I'm wondering, especially Seth, I admire so much so many of your thoughts, words, deeds, your books. I've read a bunch of them. Branding is always top of mind when I think about you, and obviously, I think about the Motley Fool brand. That's just our company, but branding matters a lot to me as an investor. In fact, I think that branding is often misunderstood because there's no number for it on the balance sheet or the income statement, and so most people calculate their valuation ratios without factoring in what, to me, might be the central asset of every great company. Every great company sets go and ends up looking overvalued because we're not counting brand. But I care about brand. Do you think AI is being well-branded today? Does AI have a branding problem?

Seth Godin: What's a brand? It's not a logo. The Motley Fool logo is a tiny fraction of the goodness of Motley Fool. You didn't win the logo sweepstakes, but you built a brand that matters. And if you look at AI logos, they're terrible. A brand is simply the promise that an organization makes and our expectation of what to expect. Hyatt has a logo, but Nike has a brand. If Hyatt came out with a line of sneakers, we have no idea what it would be like. But if Nike opened a hotel chain, we all know what it would be like. [laughs] And so that's the brand value, if you're not paying extra, there is no brand value, if you're not taking risks because you give them the benefit of the doubt, there is no brand value. Fifty years ago, the mass murderer Marlborough had an enormous brand value because people would cross the street if the convenience store was sold out of Marlborough's and buy their brand across the street. The thing about AI is anthropic as they say 600 people in their marketing department. I have no idea what they're doing because there's no consistency, there's no structure to what I should be expecting from them. It's just engineers launch stuff, and then the marketing people go to meetings and try to catch up.

AI has a brand in the sense that more people are paying more money for this new technology than has ever happened before for any technology I can recall. We're paying the money because of what it's going to do for us tomorrow, and so there's this expectation. The challenge they have, is in order to get our attention, they have made insane promises, and regularly they break those promises, and so I wouldn't trust AI to drive my car, and I wouldn't trust AI to write my prescriptions, and I wouldn't trust AI to write my books. But it does a little of those things all the time. Going forward, if there's going to be enterprise value greater than the tech value, they're going to have to develop this soft tissue brand, because I think the tech value, as always happens, will become a commodity. That means you either have to have a network effect, or a benefit of the doubt loyalty brand, or else it's a commodity you're going to charge with, it costs you to make the electricity work and a penny more, but you can't get a premium because if not, I'll just switch to somebody else.

Andy Cross: Seth, just a quick follow up there. You've written a lot about authenticity of brands. Generative AI and those tools, do they have an authenticity problem? Then a parallel to that is just in general, how do you evaluate the authenticity of a brand's marketing?

Seth Godin: I've written that I think authenticity is a crock, and I think it's a trap, and I think it should be avoided. Friends should be authentic, professionals should be consistent. If I go to see Taylor Swift and I pay $2,000 for the tickets, and she has a cold, I don't want her to act like she has a cold. I want her to fake it, and act like the best version of Taylor Swift, because she's a professional, and the same thing is true for anything I transact with a stranger hoofer. What I want from AI is not authenticity because I don't care if it's authentically having a hallucination. I want it to consistently keep its promise, and part of the job the marketers have. Well, so let me explain about marketing in tech firms. The greatest value created ever by a marketer in a tech firm is not Steve Jobs, it's Marissa Mayer. Marissa Mayer, who didn't have marketing in her title was one of the first employees at Google. At the time I was at Yahoo. Yahoo had 183 links on its homepage. Google was heading down that path really fast, and Marissa Mayer put a stake in the ground and stopped at two, and every time the engineers tried to make Google more complicated, she made them stop. That single act, which took five plus years of diligence, created what is it now, $1 trillion worth of value, because otherwise, it would have just been another place to do search. Yahoo was lazy.

I was the third member of the marketing department after they acquired my company, and so the two people who were in the marketing department, they were just in charge of putting up a billboard here and there. That wasn't marketing. Marketing is, what is the story we're going to live? What are the promises we're going to make and the promises we're not going to make? When people think of us, what are they going to think of? This has been missing in tech for a long time, and so you end up with people who let the tech run the company, and as a result, they inevitably slam into the wall.

David Gardner: I want to make sure I have my math and my history right. Seth, when you said there are two options on the Google homepage, I think one was search, and the other was, I'm feeling lucky?

Seth Godin: Correct. They're taking it down as of, like, the next couple of weeks.

David Gardner: I have to admit I haven't really clicked. I'm feeling lucky for a long time, so maybe but I love the whimsy of it.

Seth Godin: They didn't want anyone to click on it. They just wanted to show confidence. [laughs]

David Gardner: Let's shift now from branding to permission marketing. Early on, Seth Godin coined the term permission marketing to contrast with interruption tactics. These days, we've got some cookies crumbling, privacy regulations, proliferating, first party data, now king. Seth, how do you see permission marketing evolving and where should marketers focus to earn genuine consent permitted consent in 2025?

Seth Godin: When you and I met, it was 1991 or '92, and I think somewhere in there and I had just invented email marketing. Someone needed to invent it, and it was me. The whole point was, it's not spam. I testified at the US Senate against spam and got kicked out of the Direct Marketing Association in response. The Direct Marketing Association said, how dare you invite regulation of anything any company wants to do to steal attention? I said, you're completely missing the point. The good guys want there to be regulation. The good guys want it to be rational and quiet and trustworthy. It's the scammers and the spammers that want it to be the Wild West. You, the DMA, you should be on my team. I was thrilled years later, they let me back in because they understood the mistake they had made. The stuff you're talking about, it's all ham-handed, but it's all in response to greedy, lazy organizations skirting around the edges. Permission is simple. It's not the fine print. It's a simple question. If you didn't show up tomorrow, would we miss you? Would we miss you if you didn't send us that email? Would we miss you if you didn't update your website? If the answer is no, then you're a spammer, and if the answer is yes, you've earned permission. I'm confident that if the Fool stopped sending its fans and its subscribers your newsletter, you would hear from a lot of people within five minutes. That's because you've earned their permission, not you have some legal loophole you're exploiting.

David Gardner: I really appreciate that point, and I do think the Motley Fool does a good job in some regards, and I think we also send out a lot of emails, too. I don't think we're 100% yet, but I certainly think we're on the path. Thirty-one years in since you embedded email marketing Seth, a lot of people are still just trying to figure out how to do it best. It's funny, just a quick reflection, and then Andy's going to have a follow up, but my reflection is that what you just said, if we didn't send it, would anyone notice? Would anyone care? That's exactly the question that I ask in something I call the snap test when I look at companies, and I'm thinking like, will I invest in this stock or that one? The snap test was later made popular. I first wrote about this in our 1998 book, Rule Makers, Rule Breakers but it was later made popular by Thanos of Marvel Avengers fame when he snapped his fingers and half of the world, including superheroes, disappeared. But literally in 1998, I said, here's the way I think you can decide whether you should buy a stock or not. When you snap your fingers, if that company disappeared overnight, would anyone notice? Would anyone care? It has focused on impact and who's got the love out there and it's just fascinating to me that you basically said the same thing, and we're using different contexts.

Seth Godin: Well, I'm just stealing all your ideas.

David Gardner: Not at all. No, we stole email marketing from you, sir. [laughs] Andy,

Andy Cross: Seth, how about the progression or the regression in permission marketing when you think about the technology of programmatic ads and cookies and targeting over the years? Where do we stand nowadays with permission marketing?

Seth Godin: Well, it's like when one of your kids grows up and ends up in a federal prison. [laughs] When we were running Yoyodyne, we had a 82% open rate and a 33% response rate to the emails we sent. We're the largest recipient and sender of email in the world at the time that was doing permission marketing. Those were our numbers week after week. Now, for most organizations, it's 0.000001%, and the reason is the inevitable race to the bottom caused by people skirting around the edges to make their quarterly income go up. Because they're like, It's OK if I burn it down because it's an emergency, and so they cheat. It was naive of me when I wrote the book and in the years afterwards to not expect that that would happen because it always happens. What Google could have done is established better standards for how these interactions are going to go down so that good action would be more rewarded, and the open web is magnificent. We don't have an open web. We have a semi-open web, and when somebody who has enough money and resources comes in and decides to bend it to their will, then the principles and ethics of what I'm talking about often go out the window because Milton Friedman was wrong. We need both independent entities they are trying to maximize their profit and their shareholder value and community action that's organized around what's best for the culture. The purpose of culture isn't to enable capitalism. The purpose of capitalism is to enable culture, and so we're going to see all of this craft and destruction, and then the next thing is going to come, and then the next thing is going to come. My hope is that AI is going to work at least as hard to defend my attention as it's going to work to steal my attention.

David Gardner: Seth, let me shift now to something that I really appreciate about you, and that's your terseness. That's how concise you are. Truly, and I remember talking about this seven years ago with you on the Rule Breaker Investing podcast, for every blog you write, you've thrown out four or five. There's a lot, and you probably still do that or maybe you're more efficient. It's just two or three of these days, but I really appreciate the effort that you've put in to make things as tight as possible. I would say in some ways, Seth, you've built a career on brevity. Today's short form video, this is where I'm heading now, thinking TikTok I don't actually use TikTok, but turns out a lot of people do, I think Instagram. I also don't use it, and even punch your economy of attention, 15 seconds of content for a lot of videos. What lessons from your writing practice might you do this content yourself? If so, what translates?

Seth Godin: What do we make? I think most people who listen to this make decisions. You don't make pottery, you don't dig ditches, you make decisions. Maybe you make a difference, and maybe you make change happen. I'm a teacher. What I make is I help my students who have opted in to whatever we're doing like right now, change the way they see the world, change the way they get what they're getting. The rule is, put the effort in to make the teaching as cogent and concise as possible, but no more than that.[laughs] There are all these ancient fables of the guy who knocks on the Sage's door and says, wise guy, while I'm standing here on one foot, teach me everything there is, the meaning of life. My response would be, if you're only willing to wait long enough for you to stand on one foot, you don't care enough to change, and I'm not here to entertain you.

The reason I don't show up on TikTok is not that I couldn't get a lot of use because I understand the medium and I understand how to do a dance there that people might click on or the algorithm would like. It's that it wouldn't get me anything. I don't sell stuff online, but I know people who have had 42 million views of something and sold four units. The goal is not to make Mark Zuckerberg happy. The goal is not to make the TikTok algorithm happy. The goal is to achieve what you set out to achieve. What's the purpose of this work? I sometimes run into people who said, I read a two-paragraph blog post of yours, and it changed my life, but I'm way more likely to run into someone who says, I read your book and it changed my life. I'm even more likely to run into someone who said I took the altMBA, which I used to run, and that changed my life. What I'm looking for are people who are ready to lean in, and the short stuff opens the door, but they've got to then teach themselves or it's not going to work, and the problem with TikTok is there's not a lot of autodidactic experience going on there. There's just amusement.

David Gardner: Do I recall correctly that you only took one English course in high? There's some story, I remember you telling Seth about your own schooling in English.

Seth Godin: My high school English teacher, I took all the classes in high school, but she wrote in my yearbook, you are the bane of my existence, and you will never amount to anything. I still have it. I dedicated one.

David Gardner: Is that really what a teacher wrote into all like that?

Seth Godin: I dedicated one of my books to her cause was slightly tongue in cheek. My dad made a deal with my two sisters and me. We'd have to pay room and board in college. He'd pay tuition, but we had a major in engineering in exchange. Because he said, learn to solve problems, the rest of this is a bonus. Take as many English classes as you want, but first learn to solve problems. When I got to school, I discovered a loophole in the course catalog, so I took engineering and a lot of philosophy classes. I loved the thinking and philosophy, and I took exactly one English class. What I discovered is college-level English, at least for me, wasn't about learning to express myself the way I wanted to in a practical way. It was about literature, and I have too short of an attention span for that. That's correct. One English class in college.

Andy Cross: Seth, back to the, well, a little bit tied to attention spans and the marketing question that David had asked. I'm really curious about this concept between grabbing and earning someone's attention, especially today, as David said and you all were talking about just the brevity of information out there and the volume of information out there. Explain to us how we can earn someone's attention versus grabbing someone's attention?

Seth Godin: Two quick case studies. This is a book that saved my career. I'd been kicked out of publishing, and then I wrote this book called Purple Cow. It came in a milk cart, and I self-published the first 10,000 copies. Now, that's a gimmick, and I'm aware it's a gimmick, but I was only selling it to people who already liked my work, who were reading me in Fast Company. I sold out of the 10,000 copies, five dollars a copy, broke even. How did everyone else find out about it so that it has sold millions of copies? Is it because I did stunts and hung from a building and figured out how to make a commotion? Zero people. It's because somebody put this on their desk. They didn't put it on their desk because they like me. They don't know me. They put it on their desk because it would benefit them, earning them status or affiliation or the workplace they wanted to be if their co-workers knew about it. You earn attention never by doing a stunt or by grabbing it. You earn attention when someone who likes you tells someone else. If I think about David and the heritage of the Motley Fool, you had a lucky break at the beginning, which is that Ted gave you a channel on basically the pre-Internet. But that was still only what, 10,000 people at the beginning? How did you get from 10,000 people to the millions of people that know you and trust you now? Is it because you ran a billboard in Times Square? I don't think so.

It's because people who were on board with you told their friends, they told their spouse, they told their peers. Why did they do that? Because you did something worth talking about. This is the essence of the Purple Cow, and it is missed by almost everybody. When Apple goes out and hypes and hypes a TV show. Well, that's because they don't believe in themselves enough to have the show do what it could do, which is spread organically from viewer to viewer. That is how we ended up with everything that happened after the original Super Bowl ad. It wasn't that Apple ran better ads after that. It's that they made a product that people like me told their friends about. I think that Serrandos said Netflix understands this way better than whoever's running Apple TV, because they're trying to make shows that don't make critics happy, but that people want to talk about. It's that simple.

David Gardner: Let's stick with Purple Cow, one of my favorite business books. Back in Purple Cow, at one point in the book, Seth, you argue that winning companies, a fun word, cheat by building unique assets. I'm going to quote because, in fact, I have a book called Rule Breaker Investing coming out this fall, and I quote directly from you, this passage because it's so relevant for me when I think about what companies I want to be invested in. Here's a little bit of Seth Godin. "Starbucks is cheating. The coffee bar phenomenon was invented by them, and now whenever we think coffee, we think Starbucks. Vanguard is cheating. Their low-cost index funds make it impossible for a full service broker to compete. Amazon.com is cheating. Their free shipping and huge selection give them an unfair advantage over the neighborhood store." A little bit later in that passage, you end up asking, "Why aren't you cheating?" You ask rhetorically, of the reader. I will note some years later, you wrote a separate blog about how you really shouldn't cheat. Cheating is not a good thing, and you explain very clearly the other cheating that we think of, and that's not good. But I've always loved that passage, and that's why I adduce it in my book. But Seth, I want to ask you, I don't know how much time you spend looking at emerging businesses or industries today. I hope some because that's my question.

Do you see anybody cheating today in a way that impresses you? They just have an unfair advantage and they're exploding it.

Seth Godin: First, I don't remember writing any of those words. It makes me smile to read it. It was so long ago I had to call it amazon.com.

David Gardner: It's true.

Seth Godin: I made the decision a long time ago that I generally don't talk about what's going to be the next big company because every time I do, I curse them and they fail. This is your job. You are much better at it than me. [laughs] But here's what I would say. If you think of a brand that you admire, it's not because they have a good logo. It's because that brand is doing something that is an unfair advantage. I am deep in on Patagonia, almost every article of clothing I own. Could I tell if my eyes were closed, if it was Patagonia? Probably not. But I like the way it makes me feel to be the person that is going to buy that item from a company that stands for that. No one's going to be the next Patagonia because that slot is taken. Luxottica figured out how to corner the market, and it took an innovator like Neil at Warby Parker to expose the $400 premium that they had been charging as a tax to everybody. No one's going to be the next Warby Parker. There's no room to be the next Warby Parker. You can be a bottom fisher making a nickel at a time, but Warby Parker figured out how to play a remarkable game when the space changes.

My dad used to call this a change agent. Technology, big shifts, these are agents of change. When it shows up, we rescramble the board, and we saw this happen when we got streaming and YouTube and everything and cable before that. ABC, CBS, NBC, boom, toast because we scrambled the board. What I'm seeing right now is the biggest scramble of the board since the Internet and probably bigger, which is AI. If you have a job where you do something that someone could write down what they want, they're probably going to get AI to do it cheaper because if that's all the job involves is writing down the steps in the spec, I got a machine that's going to do that for me for $20 a month. That giant scramble means a whole bunch of organizations that do something that requires judgment and insight are going to arise. I think many of them are going to have very few people who work there, and most of them aren't going to need to go public, but some of them will choose to, and we're not going to recognize the corporate landscape, I think, in eight years. I really don't.

Andy Cross: Seth, when you think about remarkable companies tied to the purple cows, are there key signs of what makes in your eyes a remarkable company?

Seth Godin: Generally, there's only a little bit about them that's interesting, and then everything else they're doing is boring. That they're not trying to change everything all at once all the time. They have one principle that they stick with. In the new book, This is Strategy, I call this an elegant strategy. Microsoft said, "We're going to be the IBM of software." That's it. If we do this right, if everything we do is not about making the single best product or the most cutting edge product, but just a well supported, well sold product that the Fortune 1000 wants to buy, and we just keep doing that. No one ever got fired for buying Microsoft, we'll do fine. That we can go down the list of companies for the ages. It's not that they have a fancy elevator pitch because no one ever bought anything on an elevator. That's not it. [laughs] It's that they have a compass. The compass says, the more we do this, the better it goes. That's what you need to have. At Walmart, one of the rare exceptions, Walmart's exception was, the more we lower price, the better we do. Because lower price got the more volume, volume got the more container ships, more container ships, got the lower price, and they could repeat and repeat . But everybody else who's remarkable has to say something other than low price. The more Shake Shack acts in a way that McDonald's is afraid to go, they do better. Just keep going down the list. The more we do blank, the better we do. That's what makes you remarkable.

Andy Cross: That's great. I think that reminds me of Costco for the same reason. They're remarkable is because they have the membership business that is so reasonably priced, and they use the advantages of their scale and their low product footprint to be able to keep prices at rock bottoms level, and they make the profit up on the membership side.

Seth Godin: Well, also, and you guys are much more expert than me. As a marketer, I think what Costco did was they created a cultural narrative that said, I'm a good parent because I'm willing to buy ridiculous quantities of ridiculous items to support my family. Having 40 pounds of Vlasic pickles in a container, that's part of the brand ethos. They didn't try to out Walmart . I'll tell you one aside about this. In 1999, 2000, Walmart hired me to come give a speech to their entire digital division. I flew to Bentonville, Arkansas. The local only hotel lost my reservation. I slept on the floor in their lobby. The next morning, I went to the headquarters. There's 400 people in the room, and there's a banner behind me. It had been there for six months. Remember, this is 25 years ago. The banner says, "We can't out Amazon. Twenty five years ago, they realized their strategy was their strategy, and Jeff's was Jeff's, and if they started chasing him, the public markets would just murder them. They had to say, "No, we got 25 years to do a different thing, and then we'll see what happens." You need the humility to realize you're not going to be for everybody, but you got to be for somebody.

David Gardner: Let's stick a little bit with stuff that's cheap and stuff that's increasingly free. Because Seth, I'm just curious of your thoughts on the topic of, "Hey, I'm about to lose my job because something can do it faster, cheaper, easier." If that happens enough times, I've sometimes wondered whimsically, rhetorically aloud. If that happens enough times, that means so much stuff has gotten so cheap that maybe we don't actually need full time jobs as we once did, because these days we get Khan Academy lectures for free. You and I used to have to dial, collect, mom and dad, collect call from Seth, dollar an hour international fees. That's all free today. Google Docs, last I checked, turn-by-turn GPS navigation. There are so many things now in 2025 that are cheap or near free that we used to pay quite a bit for. I'm just curious, Seth, can you see a future where stuff keeps getting more shared, more cheaper, more free, where we don't actually worry about being displaced from our full time job?

Seth Godin: There are a few things you're twisting together here. Again, there are parts of this where I'm consistently wrong, so let's just leave that aside for a second. [laughs] Historically, every piece of technology has displaced a certain labor. When the steam shovel came along, ditch diggers were not happy. When writing came along, Plato famously said it's the end of civilization because people won't have to memorize stuff anymore. It's been going on for a very long time. Every single time that displacement has led to more jobs, not fewer jobs. Past performance might not be an indicator of future, but that's been true every single time. Number 2, we keep making certain things cheaper. The amount of time somebody used to have to go to work to get an hour of light in their home in the evening was three hours of work. Now, it's two seconds. The amount of money this pencil used to cost out of my income, it's so vanishingly small that pencils are free. Keep going down the list. We've been doing this for a very long time. But at the same time, we keep inventing all of this stuff that people say they need that they actually want. Most of what we do and buy and pay attention to in 2025 didn't exist in 1950 and no one missed it. [laughs] We're going to keep inventing these desires because human beings want two things in all areas.

Once we have a roof over our head, and we're not going to die tomorrow, we only want two things status and affiliation. Status is who eats lunch first? Who's up and who's down? Am I winning? What am I winning at? Some people get status by showing up at a board meeting in ratty clothes. Some people get status by showing up in a civil suit. Or affiliation, people like us do things like this. One of the rules apparently at the Motley Fool is you got to have those big headphones maybe with a little thing there [laughs] because people like us, that's how we show up at these events. [laughs] Affiliation works, for example, in Disney's favor, because if your kids are really into Mickey, it's probably because their friends are really into Mickey. If every single person had their favorite superhero, no one could make a living selling superhero stuff. Affiliation and status. Once we don't have to work, three hours to get an hour of electricity. Why do we still work? Why is it? David, how many billionaires do you know? 100, probably?

David Gardner: I'm invested in more than I know, I can say that.

Seth Godin: But I'm guessing you could pick up the phone and talk to 100 different billionaires, all of whom still work. What are they going to work for?

David Gardner: Good point?

Seth Godin: They're going to work for status and affiliation. We're not going to stop doing that. I am certain we're not going to stop doing that. Just like in the Star Trek world, people fight to get on the enterprise. Why? They could just stay home and use the Matter thing and eat peeled grapes, but they don't. Status and affiliation.

Andy Cross: Seth, outside of the billionaire landscape and the community, do you think that stands for everybody? Because I think there is this as we're thinking about 2025 and AI, we talked a little bit about it earlier. Just a little bit of fear out there about what is going to take my job the white collar side, that I didn't have even just six months ago or 12 months ago.

Seth Godin: The white collar people didn't complain when the punch press and the robot came along and took away the blue collar jobs and certainly, they're whining like crazy. It's going to take away your job. I am not doubting that one bit. What's going to happen is somebody is going to invent new jobs that offer status and affiliation for people who have pencils and light and all this other stuff they didn't have to pay for anymore because we keep doing that. If you do average work for average pay, for average customers, be prepared to be replaced. I am really confident that is likely. I'm not in favor of it. I wish people to have a smooth and calm life. But this is as normal as the world is ever going to be again. Today is peak normal.

Andy Cross: Seth, because you've written and talked so much about creativity, does that make creativity more important today or certainly as important as it was even just a few years ago?

Seth Godin: This is really cool. Do I have like four minutes to tell you the history of creativity? [laughs].

Andy Cross: Let's go.

Seth Godin: I just learned this the other day. The word creativity only showed up in the dictionary in the last 100 years. Creativity at work was invented by the Department of Defense in the 1950s and promoted as a way to keep white collar workers from getting too antsy. They started this whole idea of the creative at the ad agency and creativity. Before that, the expectation at work was you were going to do what you're told, and it was going to be brain dead boring. When the Industrial Revolution came to Manchester, England, they didn't have coffee carts that went up and down the aisle. They had gin carts, because people who were used to freedom in the farm had to go for 12, 13 hours in a dark room following instructions and then we got used to it. Most people do pretend creative work. The rest of the time, they're checking the boxes and filling out the forms and being part of the system. But now, that we've got a machine that's going to check the boxes, fill out the forms, and be the system, you're going to have to do actual creative work. That's going to be really stressful, particularly for people who are over 15-years-old, who got successful by turning off the part of their brain that wanted to have a spark, and now they're going to be on the hook for it. It's going to be as big of shift as when Gutenberg came out with the Bible, which caused meltdowns all over Europe because for the first time people could read this thing, instead of having someone tell them what it said. AI is going to say, "If you can't figure out how to do something that I haven't already imagined, you're going to be lower and lower in status." That's going to put a lot of people in a bad place for a while.

David Gardner: Seth, you referenced it briefly. Let's talk about it. Your new book, This is Strategy: Make Better Plans. This is the one I haven't read yet. Can you give us without causing our listeners not to go out and buy it a short prose, a cliffs notes version of This is Strategy: Make Better Plans.

Seth Godin: Part of my goal is that people don't need to buy my books because the book is an excuse for me to talk about it. If you want the souvenir edition, that's fine, and if you don't, that's fine. [laughs] If I could tell you everything in the book in 90 seconds, I would. The short version is tactics aren't the same as strategy. Strategy is a philosophy of becoming. It's the hard work we do before we do the hard work. If you have an elegant strategy, new tactics present themselves, that Warren Buffett told everybody his strategy and then just repeated the tactics as they shifted through the years. But the strategy stays the same, and what is missing from most people and most organizations is an ability to even talk about it. I argue that there are four surprising components which are systems because if you don't see the system, that means it's taking advantage of you. The college industrial complex, the wedding industrial complex, the capitalist system that drives you to think of some things as normal. It's a non-secret conspiracy that we never notice. There's time because tomorrow is different than today and everything the Motley Fool has ever done is about time because no one cares what a stock did yesterday, you're only talking about what it's going to do tomorrow. The third one games. Games are any human situation where there's scarcity and choices to be made. The fourth one I don't remember. But it's important that we learn to see how these pieces fit together so that we will be ready to make the change we want to make tomorrow.

David Gardner: When did the idea for the book first present itself to you years ago? Was it in a blog? How did these things germinate?

Seth Godin: It's all over the map. When we first met, I was in the book business, and so I went to bed every night knowing I needed to wake up in the morning with a book idea. I could only do a couple of books or one book a year, and I had to take my best shot. A book takes a really long time to write but I did it for work, and after a bunch of books, I stopped doing that because it's too much work. It doesn't pay to do it for a living. I only write a book when I have no choice. I write a book when it's the best way for me to share an idea. Some books like my book, Survival Is Not Enough, took me eight hours a day every day for a year, I threw out 100,000 words before the book was finished. Other books like The Dip I wrote in an 11-day fugue state, and it just came to me one day, and then I just wrote it. This book is a love letter to my friends who are stuck and it didn't take very long to write, but it's heartfelt in the sense that because I don't charge to coach my friends and because I don't do any consulting, I said if I was going to talk to someone I care about about why they're stuck or how the world works, what would I say? That's what this is.

Andy Cross: Seth, we spend a lot of time as analysts studying strategic plans of the companies we follow, and I want your guidance on how we can identify companies that truly have good strategic plans versus those that do not.

Seth Godin: In my experience, the ones that have a good strategic plan, it's really obvious that they do. Just before we got on, we were talking about that guy, Brad, who's building the roofing company. His strategy is super simple and it's like, on the first page of their 10K. Done. You might not agree with the strategy, but the strategy is not hidden. When Yahoo stopped being the center of the Internet, if you asked any 10 people at Yahoo, what's your strategy, they would give you 14 different answers, and they haven't had a strategy ever since. It's right there. Google had a strategy. then when they invented LLMs and what became AI, they freaked out because they said, this completely undermines our existing strategy. We don't know what to do, so they tried to keep the world from seeing AI, and now they're toast, because they can't do their old strategy anymore, and they're not winning with their possible new one. That was a good long run, but they lost the thread.

David Gardner: Let's move now to our game, buy sell or hold. Seth, you may or may not remember this. I'm springing this on you. I know you're ready for it. The key is, and I know you appreciate this about buy, sell, or hold. These are not stocks we're talking about.

Seth Godin: Oh, good. Then I'm fine.

David Gardner: We're talking about things happening in the world at large. The worlds of business in life and ask if they were stocks, Seth Godin, would you be buying, selling or holding? Let me kick it off with, let's go with this one. Is turning down more opportunities the key to doing your best work, or is that a branding luxury, Seth Godin buy, sell, or hold saying no as a growth strategy?

Seth Godin: Strong buy.

David Gardner: Why?

Seth Godin: Because no is a complete sentence. No lets you stop hiding. No puts you on the hook. No gives you the chance to become a meaningful specific instead of a wandering generality. I have never met anyone who yesed their way to where they wanted to go.

David Gardner: Brilliant. Next one up. We may have covered this one already, but let's go there again anyway. The word authentic in 2025, has it become inauthentic, buy, sell, or hold, authentic?

Seth Godin: Short. Sell. It's like, what a disaster.

David Gardner: Let's keep moving. AI tools in the creative process. A brainstorming partner or the beginning of creative complacency, buy, sell, or hold the AI creative tools.

Seth Godin: Well, what you just said is both of those sentences are true. That the same way typesetting shifted when we got desktop publishing. Some people use it to make the greatest type ever set, and some people made bank ransom notes. The same thing is going to happen here.

David Gardner: This next one comes via text beforehand, Andy Cross asking me, what does Seth, does he watch this TV show? We're about to find out. Buy, sell, or hold, Shark Tank as a lens on entrepreneurship?

Seth Godin: True story. Before they were on in the United States, the phone rang and they said, would I please audition to be the judge? I said, "What do you mean?" They said, "We want you to be the nasty, bald, possibly semitic judge." I said, "You got the wrong guy. I'm not going to show up there and scotch people's dreams."

David Gardner: Love it. Great answer. Next one up. The personal newsletter Renaissance, so from Substack to Buttondown, are curated, thoughtful emails, the new social media, buy, sell or hold?

Seth Godin: I'm buying the idea that anybody who wants to be a singular voice benefits from having this newsletter. I don't think email is the best way to deliver it, and I don't think that Substack is your friend in the long run, but I do think no matter how many people are reading it, if you can write and leave behind a legacy of work you are proud of, I'm up to 3.4 million words, that's a useful way for you to spend your time. Do not expect that it is going to come with prizes and cash, but it will build you the authority and consistency to stand for something, and it won't cost you anything.

David Gardner: Well said and hear-hear., Seth, how do you count those 3.4 million words? Is there a counter? How are you doing that?

Seth Godin: Every once in a while, I download the entire blog just in case something bad happens, and then there's something called word count because I don't keep track of any stats. I don't know how many people are reading it today. I don't have comments, but the incremental thing, about 10 years ago, I realized I had a streak, and so my blogs are queued up so even after I'm dead, there'll be new blogs coming out because I don't want this streak to end. It's just it's one of the only things that I've got right this minute that no one's ever going to catch up to, and I'm still going.

David Gardner: We love that about you, and I'm curious, Seth, do you find yourself attracted by streaks in other contexts in your life? Duolingo, for example, has this whole thing where if you start learning Spanish or Chinese, it's going to say come back tomorrow, and then it's going to start saying you've come back 57 days in a row, do you find yourself ever beholden to other streaks?

Seth Godin: Yeah, I have a lot of willpower, but Duolingo tried and failed, 40 days, my streak lasted, and I just couldn't do it. But this thing on my wrist, I'm up to 450 days. It got my health back after long COVID. It's not for everybody, but the idea that I'm going to break a 450 day streak, I'll hook it up to one of those goodwill cats or whatever. There's just no way this streak is ending.

David Gardner: Love it. For podcast listeners who can't see what you just did, Seth, what product did you just influence?

Seth Godin: Oh, there was one of those watches that keeps track of your fitness.

David Gardner: A couple more for you. I mean, I could do this all day. Buy, sell, or hold is so much fun and especially with Seth Godin. Seth, crowdsource governance, algorithmic leadership, phrases that are coming to mind, things we couldn't have imagined before, radical transparency or chaos in the C suite, buy, sell, or hold, public companies with no CEOs?

Seth Godin: There's not going to be public companies with no CEOs. But the idea of a Dow, a DAO, the idea of new sorts of institutions, that's inevitable, and it's going to be great if it's not run by a grifter or something that's part of an MLM scam. But that hasn't happened yet. But the idea that an entity can be true to what it said it was going to be true to and stick around for the long haul. I think that happens. Neal Stephenson wrote a book years ago that the whole idea that if you look at the longest lived institutions, they tend to be orders of monks, they tend to be places that have a constitution, a moat, and a way of governance that gives them consistency but flexibility. I think that we're going to see more of those, but they have no need to go public. Why would they?

David Gardner: Which Neal Stephenson book was that? I read The Diamond Age, but I don't think that was The Diamond Age.

Seth Godin: No, that wasn't. The Diamond Age and Snow Crash should be required reading for every single person. This was another one. I don't remember anything about it other than that it was tedious once I got the joke, so I didn't even finish it.

David Gardner: Let's go with this one. I think there are two more because I have a bonus one in mind. Andy, Mac Greer is going to make a toward the end of this hour together.

Andy Cross: He needs his comeback.

David Gardner: That's right. Here's my last official one. Seth Godin, buy, sell, or hold, branding yourself, are you with me here, as anti-hustle? Has rejecting the grind become the new grind? [laughs]

Seth Godin: What's Hustle? Hustle, in honor of Pete Rose, hustle is not the effort one puts into winning at hockey. Hustle is shortcuts and invading other people's space, throwing an elbow to the face and hoping you don't get caught, hustle is spamming people, hustle is asking a friend for something that they don't want to do for you and just piling up a whole bunch of favors. I am anti-hustle because you don't ever want to burn trust to earn attention. Trust is worth more than attention, and it's generative, and it lets you play the game for longer. There is this idea that shortcuts are possible and a grind is to be avoided. so the question is, is your grind additive or is it simply an endless treadmill? If you're on an endless treadmill where the grind isn't getting you anywhere, you're not in a dip, you're in a cul de sac. It's like emphysema. It's not going to get better. What you want is a grind that eventually is going to get you to the other side, and you want to do that grind without hurting the trust other people have in you. There are plenty of organizations that have done that, and we don't hear from them for a long time, and then suddenly they're an overnight success. Well, they're not an overnight success. You're just noticing them at the end.

David Gardner: Love it. "Trust is the coin of the realm." wrote dearly departed George Schultz in an excellent essay that is worthy of everyone's attention. Last one for you, Seth. He Googled you in preparation for today's interview and discovered on the Google overview page, check it, if you Google Seth Godin, it says, Seth Godin was born in George Washington's Mount Vernon, Mount Vernon, VA. My question, Seth is, that person is Mac Greer, buy sell or hold Mac Greer.

Seth Godin: Oh, I love Mac. We've never met, but I'm a fan. I have no idea how to fix the Internet. If you can get around to fixing it, please do. I never look at my Wikipedia page. It can make you go blind. If someone else wants to fix my Wikipedia page, please do.

David Gardner: Well said. Andy, last thought from both of us. I'll let you go first.

Andy Cross: Seth, thank you so much. This has been just brilliant. The only question, a topic I wanted to talk to you about because we focused so much on decision making at the Motley Fool for investors, is this concept of the lizard brain. I know we don't have much time, but I wanted to give you a chance to give us some guidance on how we can avoid being a lizard.

Seth Godin: Real science has said that maybe the amygdala isn't the lizard brain, and I'm not a neurologist. But what I would say is, please go read Steve Pressfield's book, The War of Art, and go read Annie Duke's book, Thinking in Bets.

Andy Cross: Yes.

Seth Godin: Before you spend $1 of your family's savings investing in anything, understand what those two people are telling you.

David Gardner: I want to thank Seth Godin for a very special hour here on Fool 24 and some podcast-worthy stuff that we'll be sharing throughout the fool world in the next week. Seth, I want to just say thank you, friend, and you always make me laugh, and you always make us think. Here's to the next 3.4 million words.

Seth Godin: Thank you both.

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Andy Cross has positions in Alphabet, Amazon, Apple, Microsoft, Netflix, and Starbucks. David Gardner has positions in Alphabet, Amazon, Apple, Duolingo, Netflix, Nike, Starbucks, and Walmart. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, International Business Machines, Microsoft, Netflix, Nike, Starbucks, and Walmart. The Motley Fool recommends Duolingo and Warby Parker and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.

3 Growth Stocks to Buy and Forget About

The best growth stocks are the ones you can just forget about. Buy them once and leave them alone. The road ahead may be bumpy, but these companies should be able to overcome their challenges in the long run. And since many investors don't have this unshakable long-term perspective, the stocks may be undervalued from time to time.

Here are some of these cruise-control growth stocks from my own portfolio. Some of them are cheap these days and others aren't, but I'd be happy to start brand new positions in all of them today. Except I can't, because I already own them and have no plans to sell my shares anytime soon.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue »

Alphabet keeps reinventing itself

I bought my first Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) share in December 2010, when the company still was called Google. By June 17, 2025, those stubs have gained 1,065%. I'm not complaining.

If anything, I only wish I had picked up some Google stock even earlier. The trillion-dollar tech giant you see today was once a little upstart with advanced technology and big ambitions. The company's mission is still to "organize the world's information and make it universally accessible and useful," and that's a goal without a time limit.

Alphabet is both very profitable and extremely flexible. That rare combination sets the company up for decades of continued business growth. The Alphabet you see in 2040 or 2050 may look very different from the online search and advertising specialist you've seen so far, and that's alright. This company does more than simply rolling with the market's punches -- Alphabet usually leads the charge into whatever new era comes next, such as high-powered smartphones and artificial intelligence (AI).

Two people chilling with drinks on a cruise ship.

Image source: Getty Images.

Fiverr's big growth dreams

Freelance services facilitator Fiverr International (NYSE: FVRR) is a different story. My first Fiverr share has fallen a hair-raising 87% since January 2021, and the best performer among five additions to my position is down by 27% in three years.

So the stock is struggling, but have you seen Fiverr's financial results? Here's a taste of its steady revenue growth and skyrocketing cash flows over the past three years:

FVRR Revenue (TTM) Chart

FVRR Revenue (TTM) data by YCharts

Top-line sales increased by 24% over this period while free cash flows tripled. I keep coming back to this stock whenever I have fresh cash to invest, because it often looks undervalued.

Like Alphabet, Fiverr has a beefy long-term target. This company wants to "change how the world works together." The effort so far has focused on matching online freelancers with unfilled gigs. Fiverr is all about digital service delivery at this point, from translation and graphic design to music recordings and effective AI prompts.

The growth opportunity is enormous. With $405 million of total revenues in the last four quarters, Fiverr controls less than 0.2% of this addressable market. Most of today's freelancing is managed offline, via traditional channels such as personal contacts, phone networks, or printed ads. That doesn't sound like a sustainable future to me, giving Fiverr a fantastic growth opportunity.

I can't wait for my Fiverr investments to turn profitable, but I also can't complain about having this exciting stock available at low prices. Fiverr's stock trades at just 12 times free cash flows and 10.8 times forward earnings estimates today.

So I keep buying Fiverr stock while it's cheap. Setting up just a single purchase of this undervalued growth stock will serve you well over time.

Netflix's evolution pays off for patient investors

Here's another classic set-and-forget investment.

The oldest Netflix (NASDAQ: NFLX) shares in my portfolio today have gained 10,120% over the years. I picked them up at a discount during the Qwikster panic of 2011. The media-streaming veteran is often misunderstood by bearish investors, who often see it as a risky play on unproven business ideas. I see long-term opportunity and innovation in the same ideas.

The company that dominated video rentals and destroyed Blockbuster moved on to a lightweight digital streaming model, later buttressed with a costly but effective content production strategy. Netflix has embraced ad-supported subscriptions more recently, focusing on profitable growth for the first time. There's still a lot of world left to conquer out there, and Netflix is still trying brand new business tactics. Yes, the stock is setting new all-time highs on a regular basis and it rarely looks cheap. But it's also the gift that keeps on giving in the long haul.

Should you invest $1,000 in Alphabet right now?

Before you buy stock in Alphabet, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Alphabet wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $658,297!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $883,386!*

Now, it’s worth noting Stock Advisor’s total average return is 992% — a market-crushing outperformance compared to 172% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of June 9, 2025

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Anders Bylund has positions in Alphabet, Fiverr International, and Netflix. The Motley Fool has positions in and recommends Alphabet, Fiverr International, and Netflix. The Motley Fool has a disclosure policy.

Should You Buy Polkadot While It's Under $5?

The Polkadot (CRYPTO: DOT) cryptocurrency is going through some pretty exciting changes these days. The Web3 Foundation's official crypto coin is becoming a distributed supercomputer, ready to provide a wide variety of apps and services. Yet, the coin price keeps falling.

Should you pick up a few Polkadot coins while they're available for less than $5 apiece? I think that's a good idea, and here's why.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue »

Polkadot's big internet ambitions

First things first. Polkadot was designed to support a Web3 future. The social networks and paywalls of the Web2 world were unstoppable over the last 20 years. These days, a lot of web users are getting tired of this aging structure, looking around for new ideas. The Web3 idea is one alternative, bringing more personal freedom and giving content creators more control over their creations. In this system, gigantic hubs of advertising and social media connections are replaced by decentralized services. And Polkadot's app-building ecosystem provides a handy platform to get all the Web3 ideas done in the real world.

It's still a futuristic ideology with just a handful of early success stories. But in the long run, Web3 apps could take over your online community connections, your day-to-day financial management processes, and your favorite channels for text, video, and audio infotainment. The tools won't even run in the centrally managed cloud you know and love today, but in a new global network of blockchain-based systems. When tweaked just right, the crypto world's smart contracts can run any kind of program and perform all sorts of services. And that's what Polkadot is doing, with the help of many other cryptocurrency systems.

Several gold and silver coins with various cryptocurrency logos, including a Polkadot coin in the corner.

Image source: Getty Images.

Meet JAM: The next big step in Polkadot's evolution

So far, Polkadot is mostly known for its ability to interact with other blockchain networks. This coin's smart contracts can tap into Bitcoin's (CRYPTO: BTC) monetary value storage, Ethereum's (CRYPTO: ETH) sophisticated contracts, and Chainlink's (CRYPTO: LINK) real-world data reports, just to name a few.

It's also known as a complicated and cumbersome system, but that's changing in 2025. Polkadot's central blockchain will soon be replaced by a more flexible and standards-based system known as JAM (the Joint-Accumulate Machine, if you're curious). This is actually a virtual machine in the blockchain universe. It can compile and run any code for bog-standard central processors, because it's a software-driven and full-featured RISC-V processor.

For example, Polkadot co-founder Gavin Wood has made it a habit to show off old-school computer games running on a test version of JAM. His personal laptop is good enough to make that work, but the full JAM upgrade will run on hundreds of server-class computers around the world. Imagine what this on-demand supercomputer can do for the Web3 vision.

Don't expect instant fireworks

JAM is coming up, probably in the second half of 2025. It won't cause an immediate frenzy in the Polkadot community, because it takes time for people to use new tools. Then the tools must create useful apps, which in turn need to find a target audience of actual users. So it's not a magic wand that will make Polkadot's developer community's dreams come true in a heartbeat, and it won't lift Polkadot's usage-based coin price right away.

But this is a much-needed step toward a true Web3 version of the online world. In the long run, I expect Web3 alternatives to disrupt the online experience as you know it today. Web2 leaders such as Meta Platforms (NASDAQ: META), Spotify (NYSE: SPOT), and TikTok will either join the Web3 revolution or put up roadblocks instead. I can't wait to see how true innovators like Netflix (NASDAQ: NFLX) and Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) will find their place in the Web3 era.

Take it easy out there, Polkadot investors

I could be wrong, of course. Web2 may stick around for another decade or two, as the current leaders focus on protecting the old social media world. Other cryptocurrencies can also support Web3-worthy apps, though they'll need to overcome Polkadot's built-in advantages first.

So I'm not betting the proverbial farm on Polkadot coins. I simply recommend any investor who agrees with the Web3 project's ideas to pick up a few Polkadot coins while they're cheap.

This cryptocurrency is only worth $6.6 billion today, which is a far cry from the trillion-dollar titans you see ruling today's Web2 structure. The coin price could multiply by 10 or 100 and still look small next to Meta and Alphabet. In short, Polkadot can be a big long-term winner even if it never matches the Magnificent 7 group's trillion-dollar market caps. I think that's worth a modest position in your long-term crypto portfolio.

Should you invest $1,000 in Polkadot right now?

Before you buy stock in Polkadot, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Polkadot wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $657,871!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $875,479!*

Now, it’s worth noting Stock Advisor’s total average return is 998% — a market-crushing outperformance compared to 174% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of June 9, 2025

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Anders Bylund has positions in Alphabet, Bitcoin, Chainlink, Ethereum, Netflix, and Polkadot. The Motley Fool has positions in and recommends Alphabet, Bitcoin, Chainlink, Ethereum, Meta Platforms, Netflix, and Spotify Technology. The Motley Fool has a disclosure policy.

Could Buying Netflix Today Set You Up for Life?

Shares of Netflix (NASDAQ: NFLX) have likely minted many millionaires over the years. If you had invested $10,000 in its initial public offering (IPO), you would have more than $10 million today.

There probably aren't too many who invested $10,000 at its IPO and still own Netflix stock today, which climbed and crashed on many occasions. But those who invested early and held their positions are enjoying fabulous returns.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue »

Although it isn't that young growth stock anymore, it has other things going for it. Today, it's a household name with formidable assets, and it's the leading paid streaming service. Can it still set you up for life today?

Streaming for all

Netflix has gone through several iterations on its way to becoming the leading global streaming company. It went public in 2002, five years before it became a streaming company. You would have had to have confidence in its chances as a DVD rental company to have invested at the time, so early investors either saw a great spark of innovation or were just lucky.

Today, the company services more than 300 million global viewers through its premium paid subscription channel as well as its relatively new ad-supported network. It generates increased revenue through more subscriptions, price hikes, and advertising. As more people join the ad-supported tier, it gets higher ad revenue through increased views.

Couple watching TV.

Image source: Getty Images.

The company uses a top-down margin model, which means it determines what kind of margin it wants to have and spends accordingly. That could restrain how much content it produced at a particular time, but it ensures efficiency and profitability.

In the 2025 first quarter, revenue increased 12.5% year over year, and operating income increased 27%. Operating margin expanded from 28.1% to 31.7%. Management is guiding for revenue to increase 15.4% in the second quarter and for an operating margin of 33.3%, up from 27.2% last year.

Upcoming opportunities

Netflix shifted directions several times in the past, from its origins as a DVD company to streaming, and from a premium network to offering the ad-supported tier. There have been worries multiple times about where it might be headed, but it has always landed on its feet and continued to run.

The accelerated shift to streaming that began when the pandemic started is still winding down, and that was followed by the ad tier and a pivot to offering gaming. There hasn't been a shortage of new opportunities over the past few years, but I wouldn't be able to envision what the next stage could be.

The field is quite full today, with many of the smaller players consolidating or breaking up, figuring out where they belong in the world of streaming. Netflix has been the steady and stable leader throughout this time.

The company now produces world-class films that can compete with the best studios. It has had some limited runs of its films in theaters, but it hasn't taken that route as a significant part of its operating model. Although that could change if it makes sense, as streaming has eaten away at the box office, it doesn't seem that theaters are the next step for Netflix at this time.

Many companies have made the mistake of entering new areas that would seem complementary instead of focusing on their core competencies. It's always a balance for an innovator, and it could be something lucrative at some point in time.

A hefty price to pay

Netflix stock has delivered for shareholders, and it has a premium price tag to show for it. It trades at a price-to-earnings ratio (P/E) of 57 and a price-to-sales ratio (P/S) of 13.

It was recently reported that management had plans to reach a market cap of $1 trillion by 2030. That implies the stock almost doubling, and it's not really within its control.

However, it can take action to generate higher sales and profits and boost its price. I think that's an ambitious goal, but while possible, it's not likely. Netflix is a mature company, and it would have to keep up the growth it's reporting today to double revenue over the next five years -- it would require a compound annual growth rate of 15%.

However, that assumes the same premium P/S. If that goes down, it won't be able to double its market cap even with those growth rates.

So, unless you invest a lot of money and have a long time horizon, I don't think Netflix stock will set you up for life. But it can still be a valuable part of a wealth-creating portfolio and grow over time.

Should you invest $1,000 in Netflix right now?

Before you buy stock in Netflix, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Netflix wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $657,871!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $875,479!*

Now, it’s worth noting Stock Advisor’s total average return is 998% — a market-crushing outperformance compared to 174% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of June 9, 2025

Jennifer Saibil has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Netflix. The Motley Fool has a disclosure policy.

Is Roku Stock a Long-Term Buy?

At first glance, Roku (NASDAQ: ROKU) looks like a terrible investment. Earnings are negative. Sales are rising, but much more slowly than they were four years ago. The stock trades at an unaffordable valuation of 125 times forward earnings estimates. After a long-forgotten price spike in the pandemic lockdown era, Roku's stock fell hard and then traded sideways over the last three years.

But if you look a bit closer, you should see a healthy long-term growth story in play. Roku targets a huge global market, following in the footsteps of proven winners, and the stock doesn't appear expensive at all from other perspectives.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue »

It's actually one of my favorite stocks to buy in 2025, and Roku should be a helpful addition to long-term portfolios.

Breaking down common concerns about Roku stock

Let me deconstruct the scary qualities I mentioned above.

Negative earnings

Roku's red-ink earnings are at least partly a voluntary choice. The company treats its streaming hardware as a marketing tool, selling Roku sticks and TV sets below the manufacturing and distribution costs. This user-growth tactic is especially unprofitable in Roku's highest-volume sales periods. The holiday quarter of 2024, for example, nearly quadrupled the devices segment's negative gross margin from 7.6% in the third quarter to 28.6% in the fourth.

In other words, Roku is running its business with unprofitable profit margins to maximize its market reach and user growth. Furthermore, I'm talking about generally accepted accounting principles (GAAP), which is the standard accounting method used for calculating taxes. Roku often posts negative GAAP earnings that result in tax refunds rather than expenses.

At the same time, free cash flows tend to land on the positive side with modest cash profits. That's just efficient accounting powered by stock-based compensation and amortization of Roku's media-streaming content library.

Slowing sales growth

Roku's year-over-year sales growth has averaged 14.7% over the last two years. That's a sharp retreat from 40.9% in the three years before that. But don't forget that the extreme growth was driven by the COVID-19 pandemic.

Lots of people turned to digital media during the lockdown period, resulting in a unique business spike for companies like Roku and Netflix (NASDAQ: NFLX). The pandemic also happened to take place just months after Walt Disney (NYSE: DIS) launched the Disney+ streaming service, inspiring a torrent of copycat service launches. Long story short, there may never be a media market like the one in 2020-2021 again. Holding on to nearly half of that nitro-boosted growth rate in recent years is actually really good.

Sky-high valuation

Let me point back to the voluntary GAAP losses. Roku isn't trying to generate huge taxable profits at this time, which makes price-to-earnings (P/E) ratios largely unusable. Even the forward-looking version of this common metric relies on Roku's guidance targets filtered through Wall Street's analysis. If anything, the analyst community's projections are more optimistic than Roku's official targets. Management expects a $30 million GAAP loss in fiscal year 2025, which would work out to another "not applicable" P/E ratio.

If you look at other valuation metrics, Roku starts to look like a bargain. Trading at 2.6 times trailing sales, the stock is comparable to slow-growth giants such as Caterpillar or Unilever. Roku also seems undervalued, if you base your analysis on its robust balance sheet, with a price-to-book ratio of 4.4 and a price-to-cash multiple of 4.9.

Two people in different moods share a TV couch. One smiles at the screen and the other looks away.

Image source: Getty Images.

The stock seems stuck

I'll admit that Roku's stalled stock chart can be frustrating. Share prices are down 17% over the last three years, missing out on 44% growth in the S&P 500 (SNPINDEX: ^GSPC) market index. Roku's sales are up 45% over this period, while free cash flow rose by 66%. When will the big payoff come, rewarding patient shareholders for Roku's quiet success?

That's OK, though. Keeping stock prices low just gives investors more time to build those Roku positions. I have bought Roku more often than any other stock since the spring of 2022, and I might not be done adding shares yet. Whenever I have spare cash ready for investments, Roku pops up as a top idea. That remains true in June 2025. So, let the chart slouch lower. Affordable buy-in prices can set you up for tremendous long-term returns.

Should you invest $1,000 in Roku right now?

Before you buy stock in Roku, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Roku wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $669,517!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $868,615!*

Now, it’s worth noting Stock Advisor’s total average return is 792% — a market-crushing outperformance compared to 173% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of June 2, 2025

Anders Bylund has positions in Netflix, Roku, and Walt Disney. The Motley Fool has positions in and recommends Netflix, Roku, and Walt Disney. The Motley Fool recommends Unilever. The Motley Fool has a disclosure policy.

Is Starbucks Serving Up Promise or Peril?

In this podcast, Motley Fool analyst Asit Sharma and host Mary Long discuss:

  • What to do with 2 extra minutes.
  • Earnings from Starbucks.
  • What's cooking at Wingstop.

Then, Motley Fool analyst Yasser el-Shimy joins Mary for a look at Warner Brothers Discovery, in the first of a two-part series about the entertainment conglomerate and its controversial CEO.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue »

To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. When you're ready to invest, check out this top 10 list of stocks to buy.

A full transcript is below.

Should you invest $1,000 in Starbucks right now?

Before you buy stock in Starbucks, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Starbucks wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $623,685!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $701,781!*

Now, it’s worth noting Stock Advisor’s total average return is 906% — a market-crushing outperformance compared to 164% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of May 5, 2025

This video was recorded on April 30, 2025

Mary Long: A dollar saved is a dollar earned, so a minute saved is what? You're listening to Motley Fool Money. I'm Mary Long joined today by Mr. Asit Sharma. Asit, good to see you. How are you doing?

Asit Sharma: I'm great, Mary. How are you doing? Good to see you.

Mary Long: I'm doing well. We got reports from Starbucks today, that's the coffee chain that most listeners are probably pretty familiar with. They're in the midst of a turnaround. They dropped earnings yesterday after the bell. I want to kick us off by focusing on Starbucks' measurement of a different currency, not dollars, but time, Asit. A big focus of Starbucks' turnaround is returning the chain to its golden age of being a neighborhood coffee house. But as a part of that, there's also a focus on efficiency. Management seems to think they're making good progress on that efficiency front. The company shaved two minutes off its in store wait times thanks to the help of a swinky ordering algorithm. If you had an extra two minutes in each of your days, what would you be doing with that time?

Asit Sharma: Well, I'm not giving it back to TikTok and YouTube shorts, I'm done with you guys. I'm grabbing the cast iron bookmark, breaking out of that house, and I'm getting two minutes extra to read Orbital by Samantha Harvey, which is my Middle Age men's book club read of the month, and I'm behind, I need it finished by Saturday.

Mary Long: It sounds like you're being very productive with those extra two minutes.

Asit Sharma: Living my best life.

Mary Long: There's a detail here that's very interesting to me because notably, this algorithm that's shaved off these two minutes of order times is not powered by artificial intelligence. Instead, it follows an if then structure. This is fascinating to me because it seems like every other company is going out of their way to highlight its AI capabilities, build themselves as an AI company, even if they don't really play in the tech space. What does it say about Starbucks that they seemingly have an opportunity to do that with the rollout of this algorithm and yet they're not?

Asit Sharma: Well, on the one hand, I think they would love to be able to float some great AI stuff to the market, but truthfully, everyone knows that it's going to take more than AI to solve Starbucks' problems, so let's get real here and go back to some very elementary type of algorithmic thinking to solve some of the throughput issues they have.

Mary Long: Again, Starbucks seems pretty proud of these shorter wait times, but that doesn't necessarily seem to be translating into great sales numbers quite yet. I'm going to call out some metrics from the report, including same store sales, which is closely watched here, and you tell me how you're interpreting these numbers. Do they spell to you, Asit Sharma, promise or peril for the coffee company? We'll kick things off with same store sales. In the US, that's down about 3% for the quarter. What do you say, Asit, promise, peril, something in between?

Asit Sharma: I think that's an easy peril. This is the trend at Starbucks. They're losing a little bit of traffic. They're trying to turn it around to get people to come back into the stores or come back to the drive throughs. They have a strategy for this, back to the good old days. We can chat about this. But this is emblematic of Starbucks larger problem, so this is a peril call, easy.

Mary Long: Two hundred and thirteen net new store openings in the second quarter, bringing the total store count to nearly 40,800 around the world. Promise, peril, something in between?

Asit Sharma: Promise. I like that. Brian Niccol, turnaround artist. Let's slow this puppy down. Why should we be expanding when we don't have the unit economics right? Why should we be expanding when CapEx, capital expenditure is one of the things dragging this company down? Most people don't realize Starbucks has a pretty big debt load because it has invested so much in its stores over the years. Why don't we try to figure out how we can solve some of our problems with operating expenses versus capital expenditure? Let's also try to renovate stores at a lower cost. All of this points to taking it very easy on that new store development, so I like that, it's promise.

Mary Long: Just to be clear, you're saying that that 213 net new store openings number sits right at the sweet spot of, Hey, you're still growing, but it's at a small enough clip that it's not distracting from the real focus, which is improving throughput at existing stores?

Asit Sharma: Yeah. It's also a signal that the new management isn't taking the easy way out. Conceivably, one way you could solve Starbucks' problems would be to take on a little bit more debt and to speed up new stores and to say, We're going to actually increase revenue, but traffic will take a bit of time to come back to the stores. We know people of our brand, so we're going to throw a bunch more stores out in places where we don't have this dense concentration and cannibalization. We're going to map this great real estate strategy out. They could have easily said that, but I don't think the market would have liked it too much, so they're doing the sensible thing, which is like, we're not really worried about adding new stores right now, that's not the problem that we have to solve today.

Mary Long: Our next quick hit metric, GAAP operating margin down about 7% compared to a year ago. How do you feel about that one?

Asit Sharma: It's a little bit of peril situation going on there, Mary. Starbucks is doing something which I think should help the business, which is to say, we've got a couple of pain points for customers. One is the time that it takes for customers to get through their order, average wait times of four minutes. You pointed out going this algorithmic route, so very old school. If a drink is very complex to make, don't make that the first thing you do, or in some cases, maybe you should if it has x number of ingredients, so that way it's ready and the stuff isn't melting on top when the customer gets it. Don't just do first come first serve. I think that is a really insightful way to start from scratch if you're a new CEO. Starbucks has these problems which they're thinking can be solved by labor. Then bring more people in so that we can satisfy customers, we can keep that throughput moving, but that increases your operating expenses, and they've got leftover depreciation from all of the investments they've made in technology.

Under the previous CEO, they were trying to solve their problems by having more components like the clover vertica which make things automatic, and they had a cool brew system, which was very expensive, so now we're seeing that work through the profit and loss statement. What we're seeing in the GAAP numbers is that net income is going to be pressured. Number 1, they still have a lot of depreciation that they have to account for, and Number 2, to keep customers happy, which should be the first order of business, they're going to have to hire more baristas, keep those shifts occupied. That is not a clear out type situation, it will take time to resolve. That's a peril.

Mary Long: Last but not least, we got GAAP earnings per share. That's down about 50% compared to a year ago. I think I know where you might land on this one. What do you say?

Asit Sharma: It's a peril. Something that was a little iffy in the earnings call is both Brian Niccol and his new CFO, who's actually a veteran of the retail business, Cathy Smith. They were like, don't worry about earnings per share too much. We really think you should focus on us taking care of the customer, us becoming that third place again, us becoming the brand that attracts people, us being the place where you can have these day parts like the afternoon where we're going to revive your desire to come into the store and maybe have a non alcoholic aperitif, mind you, I'm not sure that's what investors want to hear. Investors will give a long line to Brian Niccol because he has been successful in the past, and so has his new CFO. But I didn't like that, don't pay attention to this because we're investors, we want money. We give you money, you make money, you give us back money in terms of dividends and share price, so a little bit of peril there.

Mary Long: Another data point that I do think is relevant to the Starbucks story and just like the consumer story more broadly is GDP data, which we got out this morning. That showed a contraction of 0.3% down from 2.4% growth a quarter ago. This is the first decline since the start of 2022. Starbucks can improve wait times all they want, they can implement this back to Starbucks strategy, but if we are headed toward a recession and the company is already still struggling, how does that macro picture affect this chain that sells seven dollars drip coffees and $10 lattes to people?

Asit Sharma: Mary, the first thing I'm going to ask you is, I actually throw circumstance Kanata Starbucks once every two weeks, and I buy drip coffee and sometimes hot chocolate, and we'll buy a pastry here and there. Where are you getting these seven dollar drip coffees from? Is that some venti with adding some special milk? I don't get that. It is expensive, stop, but seven sounds excessive.

Mary Long: Okay, Asit. I was at a Marriott Hotel earlier this month for a latte.

Asit Sharma: Here we have the first qualification. Like, well, I was at the airport Starbucks. It's not the airport Starbucks, but everyone listen to Mary. It was at Marriott Hotel. Go ahead.

Mary Long: There are some asterisks attached to this example, but it fired me up, so I'm going to use this platform to share it. I'm at Marriott in Collierville Tennessee for a wedding earlier this month. There is no free coffee in the lobby at this hotel, which was my first red flag. I go down searching for coffee, and all that there is is a Starbucks Bistro, so I say, Okay, I'll go to the Starbucks Bistro, buy my coffee. It was a large, but it was a drip coffee. No fills, so easy, they turn around, pour the cup, and it cost me $7.50. I was so enraged, I was ready to throw that coffee across the lobby. I did not. I held it in, but I'm using this moment to share that. That is a real number. Though, again, perhaps that's not the price at every Starbucks.

Asit Sharma: Well, I want to extrapolate from that. Which is to say, if it's seven bucks at that Marriott, that tells us something about what's happened to the price over the last few years because in all honesty, that entry level drip coffee, a tall order with nothing on it has increased. I'm going to guess it's 30-40% more than it was just two years ago. Now, some may say that this is taking a little bit advantage of commodity inflation and inflation in general, that Starbucks took an opportunity to bump up those prices, even though it has tremendous purchasing power, and it should be one of the first places to say, Hey, we're going to hold your price steady because we're Starbucks, because we buy from I don't know how many coffee providers across the globe. It's interesting Brian Niccol is saying, We're not going to raise prices anymore this year. I think he's sensing the winds and maybe realizes that Starbucks took a little bit of advantage of its most loyal customers by bumping up these prices.

This is yet another thing that makes this very hard. But all in all, I do want to give the new team credit for leaning toward, again, OpEx people versus machines because under the previous management, Starbucks was really thinking that it could solve so many things by having automation. They could improve the rate at which people are going through the drive through lines and the wait times that you have even if you ordered in advance on your mobile order app, and it became something where they lost connection with the customer, and management, of course, is well aware of that. But it reminds me of something that Ray Kroc said years ago, the man who bought McDonald's when it was all of two restaurants, I think, and turned it into what it is today, he said, Hell, if I listened to the computers and did what they proposed with McDonald's, I'd have a store with a row of vending machines in it. Under the previous leadership, I almost felt like that's where they thought they could go, it's just a really automated format without this customer connection. Bringing that back, even though it sounds a little iffy, Mary, whoever is going to go back to Starbucks as a real third place when so many great community coffee shops have sprung up and our consumption preferences have changed? I still applaud management for getting that, that you've got to do right by your customers, price wise, ambience wise, connection wise, brand wise. Maybe there's something in there. Of course, this is a harder problem to solve than Brian Niccol had at Chipotle.

Mary Long: I want to close this out by getting another look at the fast casual business from a different company, one that really is leaning more into this digital landscape, and that's Wingstop. Not even a year ago, this chicken wing joint was flying very high, indeed. Shares have dropped significantly since then, down about 45% from their high in September 2024. We're going to get to their earnings that dropped this morning, which were more positive in just a moment, but before we get them, let's look at the past several months. Why that drop? What headwinds was this company up against?

Asit Sharma: Wingstop created its own headwinds in a way, Mary, because it had been so successful improving same store sales. The company has a really light real estate footprint, stores are incredibly small compared to some of their wing competitors, and they're meant for just going in, maybe sitting down, but mostly picking up and taking away. They really started to get a deeper concentration, some good metropolitan markets, not huge ones, but decent markets. They saw such an increase in traffic that their comparable stores went through the roof on what's called a two year stack. You compare what you sold today versus not just one year, but two years ago. When you lap great results, it becomes really hard. You can't keep increasing those results exponentially. This year, it turns out what they're doing is holding the gains over the past two years, but it's not like they're having another year where you're seeing same store sales increase by 25%. The projections were, this year we're going to grow those same store sales by mid digits to single high digits, and with this latest report, they're saying, Well, they could be flat this year. The market like the report for different reasons. But that's what happened to the stock because investors were like, Wait a minute. You're spending more on marketing. Yeah, because we're getting to the NBA. We're the official wing of the NBA. But I want those profits. Well, you're not going to get them because we're scaling, and people are just lining up to develop new franchises, and we're going to build this business out globally.

Investors were a little bit confused last quarter. We're not getting profits that we want or as much profit as we want. We're not getting the growth that we want to see. But in the grand scheme of things, those were very understandable pauses in the business model and the economic model, and I think over time, it's destined to pick up. But you had some questions about the earnings today.

Mary Long: Help us make sense of this most recent quarter because, OK, we saw a teeny tiny improvement in same-store sales. That number only ticked up by 0.5%. But there are some other numbers that seemed pretty impressive. You've got systemwide sales increasing almost 16%, hitting $1.3 billion, total revenue up almost 17.5%, net income increasing, wait for it, 221%. That's all in spite of what's obviously a very tricky, very uncertain macro environment. We've already seen that impact trickle down to other fast-casual chains. Domino's, for instance, reported a decline in same-store sales earlier this week, which is pretty rare for them. What's working and what's not in the Wingstop model, as we've just seen it reported today?

Asit Sharma: Wingstop has been a company that's invested a lot in its technology. They've moved digital orders to some, I think, 70% now of their sales. That helps them with a leaner cost structure. Also, Mary, the company has its tremendous cash on cash returns. If you're an investor, let's say, a franchisee in a Wingstop business, you can make 70% cash on cash returns, 50% if you use financing, and that's just a stellar type of return in the QSR, quick service restaurant industry. What they have is tremendous demand in their development pipeline. Their franchise groups are like, we love this, we want more, and that's propelling a really fast store growth count. With Starbucks, they're slowing down. Wingstop is trying to build out new units as fast as possible, and that's where the growth is coming from. What investors are seeing is, I can live with this equation. You have a lean operation. You don't really own your own supply chain. You work with partners, so you've got less exposure to that. You seem to be able to manage all-important bone-in chicken price really well and not pass those increases on to customers for the most part, so I want in and I want to develop more stores.

I will note that the company, one of the things that investors did like earlier this year, is the company keeps increasing its total advertising spend based on systemwide sales. It used to be 3%. Then it was 4% of systemwide sales was advertising budget for local markets. Now it's something like 5.5%. But look, with these big brand partnerships, like I mentioned with the NBA, and a lot more advertising in local markets, that's only increasing the flywheel of returns for the franchisees. This is a company that just looks destined to grow, almost like Dunkin' Donuts did in the early days. That's. A powerful equation for investors who can withstand the volatility of angst over same-store sales in any given quarter. Think of this as like, I'm going to buy this business for 10 years, and I'm going to watch it expand into Europe, into the Middle East, here in the States, and I'm going to watch you take market share from some of the bigger competitors who have larger store footprints. Of course, there's a lot that can go wrong in that. They have to keep executing and they have to make sure that they do manage those all-important bone-in chicken cost over time. But I like their chances in this environment.

Mary Long: Asit Sharma, always a pleasure to have you on the show. Thanks so much for giving us some insight into coffee and bone-in chicken wings today.

Asit Sharma: Thanks a lot, Mary. I had a lot of fun.

Mary Long: Two of the biggest movies of the year, a Minecraft movie and Sinners, both came out of Warner Brothers Studios. But there's a lot more to this company than its movie-baking business. Despite the success of those two films, the stock WBD has been far from a winner for its shareholders. Up next, I talk to Fool analyst Yasser El-Shimy about Warner Brothers Discovery. This is the first in a two-part series. Today, we talk about the business. Tomorrow, we shine the spotlight on David Zaslav; the character charged with leading this conglomerate into the future.

Warner Brothers Discovery came to be as a result of a 2022 merger between Warner Media, which is the film and television studio that was spun off from AT&T, and Discovery, another television studio. Together, today, this is a massive entertainment conglomerate, and it owns the likes of HBO, Max, CNN, Discovery Plus, the Discovery Channel; a mix of streaming services and traditional cable networks. One of the reasons, Yasser, why I find this company so interesting is because you can't really talk too much about it without hearing all these different names, all these different services, a fascinating history of mergers and acquisitions and spin-offs, etc. I want to focus today mostly on the person who has been tasked with leading this massive conglomerate into the shaky future of media. But before we get to David Zaslav, let's talk first about the company. Again, WBD is a big conglomerate. What are the most important things about this business as it exists today that investors need to know?

Yasser El-Shimy: Well, thanks, Mary. To tell the story of WBD is to almost tell the story of entertainment itself in the United States. We're talking about structural challenges that are afflicting almost all television and film studios across the board, as well as TVs on TV networks. On the one hand, you have a structural decline of linear TV viewership. That is your basic cable, basically people, paying a monthly fee for whatever provider there might be to get a whole host of channels that they flip through at home. We've heard of the phenomena of cord-cutting. It has almost become a cliche at this point. It has been going on for years, at least over a decade at this point, but recently, it seems to have accelerated even further as people migrate more and more toward streaming options, subscribing to such channels as Netflix and Disney+ and Max and others. This has created quite a dilemma for a lot of studios like Warner Brothers Discovery, where much of the profits and the free cash flow has traditionally come from those very lucrative linear TV deals that they have had with the likes of Charter Communications and others. They have had to effectively wage a war on two fronts. They are being disrupted by the likes of Netflix, they're losing subscribers on the linear TV site, but at the same time, they can't go all in on streaming, at least not just yet, because so much of their profit and so much of their sales actually come from that linear TV side that is declining.

What do you do? You try and just be everything to all people, and that has become a challenge. Warner Brothers is no different here. We're talking about a company that started off in 2022, as a result of that merger. You talked about between Discovery and Warner Brothers. Since then, they have focused on two main objectives. The first one is to pay down as much of the debt on the balance sheet as possible, and we can get to that later, and the second goal has been to try and effectively promote and develop their streaming business. Initially, it was HBO Plus, now it's called Max, and try and actively compete with the likes of Netflix and Disney. They've actually done rather OK on that front, as well.

Mary Long: Let's talk about the debt before we move on because this is a big gripe with the business as it exists today. Warner Brothers Discovery carries $34.6 billion in net debt. That's as of the end of fiscal 2024. You get to that number because there's $40 billion gross debt minus $5.5 billion of cash on hand. How did they end up with so much debt? $34.6 billion is a lot of debt. How did they end up with so much of that in the first place?

Yasser El-Shimy: That is a lot of debt. Let's just say that David Zaslav who was the head of Discovery, he was very enthusiastic about putting his hands on those assets from Warner Brothers. As a result, he actually saw that merger with the Warner Brothers assets from AT&T. AT&T took a huge loss on the price it had originally paid to acquire Time Warner, a 40% loss. However, what they did do is that they effectively put all the debt that they had from that business, as well as some of their own debt, into this new entity that was to merge with Discovery. Warner Brothers Discovery just was born with a massive debt load of $55 billion or so. That was nearly five times net debt to EBITDA, or earnings before interest, taxes, depreciation, and amortization, which was very high leverage for this new company. From the very beginning, Warner Brothers Discovery had to deal with paying down that huge debt load. Luckily, a lot of that debt was in long-term debt effectively that most of it will mature around 2035. Can be easily rolled over. It has an average interest rate of about 4.7%. It's not the worst in the world. Considering how much cash flow per year that Warner Brothers Discovery is able to produce around, again, the $5 billion range or more, you can see that the company has been able to effectively navigate this and pay down that debt. David Zaslav has paid down over around $12 billion since that merger took place. That leaves them with the $40 billion you're talking about. Still more to go, but at least you can see that they are able to accomplish that feat.

Mary Long: Let's also hit on the streaming service because that's an essential part WBD and where it wants to go in the future. Max, which is the streaming service that's basically HBO plus others allegedly has a clear path to hitting, this is per their most recent earnings, at least 150 million global subscribers by the end of 2026. At 150 million global subscribers, that would make it about half of Netflix's current size. What metrics and what numbers does Max have to post in order to be considered a success?

Yasser El-Shimy: I would say that Max has to, again, focus on growing that subscriber base, and they have done an excellent job at that. They've almost doubled subscribers year over year, reaching around 117 million subscribers currently. They accomplished that through a strategy that had two wings to it. The first is that they effectively bundled a lot of content into the Max service. The previous HBO Plus service, it merely had some TV and film IP that the studios produced from the namesake HBO, but also from the Warner Brothers Studios. But then they decided to expand that to include also shows and other content from the reality TV side of the Discovery side of the business. Think of your home network, HGTV, or Food Network, and so on. They accommodate a lot of that content in there. They also introduced live sports and live news into the Max. That made it a lot more appealing to be a place where you can have almost all of your viewing needs met. That has been a successful strategy for them. They have also struck a partnership with Disney to bundle Disney+, Hulu, and Max together for a reduced price, but that has definitely also helped with the increase in their subscription numbers. But I would also be remiss to say that they have successfully and actively sought to expand their presence in international markets.

They are still at less than half the markets where Netflix is, so the opportunity is still pretty vast on there. However, as you started your question with asking about the metrics that we need to be watching out for, obviously, we need to be watching out, as I said, for subscriber numbers, as well as the EBITDA operating margins that will come from the streaming side. They are targeting around 20%, which would actually very good if that turns out to be the case, long term. But also we need to look at things like average revenue per user or ARPU. How much are these subscribers contributing, both to the top and bottom line for Max? I think on this metric, there might be a little less confidence because especially when you expand internationally, you're going to get a lot of subscribers who are not paying as much as a US subscriber might, so you might be looking at a decline there. On the bright side, they've introduced advertising as part of the package, but the basic package that you get. That strategy we have seen it successfully play out with Netflix, and I think that they may be able to increase or ad revenue on Max, and that can be a big contributor for their profits as well.

Mary Long: As always, people on the program may have interest in the stocks they talk about and the Motley Fool may have formal recommendations for or against, so don't buy or sell stocks based solely on what you hear. All personal finance content follows Motley Fool editorial standards and is not approved by advertisers. For the Motley Fool Money Team, I'm Mary Long. Thanks for listening. We'll see you tomorrow.

Asit Sharma has positions in Marriott International, McDonald's, Walt Disney, and Wingstop. Mary Long has no position in any of the stocks mentioned. Yasser El-Shimy has positions in Warner Bros. Discovery and Wingstop. The Motley Fool has positions in and recommends Netflix, Starbucks, Walt Disney, and Warner Bros. Discovery. The Motley Fool recommends Marriott International and Wingstop. The Motley Fool has a disclosure policy.

A Steady Business During Uncertain Times

In this podcast, Motley Fool analyst Jason Moser and host Ricky Mulvey discuss:

  • How trade disputes are impacting the Port of Los Angeles.
  • What PayPal's advertising business means for its growth story.
  • Earnings from Spotify.

Then, Motley Fool personal finance expert Robert Brokamp joins Ricky to discuss how to diversify your savings.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue »

To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. When you're ready to invest, check out this top 10 list of stocks to buy.

A full transcript is below.

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This video was recorded on April 29, 2025

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Ricky Mulvey: The ships are slowing down. You're listening to Motley Fool Money. 'm Ricky Mulvey joined today by Jason Moser, the man who can do it all by himself. Jason, thanks for being here, man.

Jason Moser: Thank you for having me, Ricky. How's everything going?

Ricky Mulvey: It's going pretty well. I'm going to Casa Bonita tonight, which I feel like is a real introduction to Denver, and I will tell you about what that is maybe after the show, because we got a lot of news to break down.

Jason Moser: Yes, we do.

Ricky Mulvey: Let's get to this story. We have a lot of earnings going on, but I think this macro story is worthy of investors attention. Gene Seroka is the executive director of the Port of Los Angeles, and anytime you start getting port directors going on cable news, it's usually not a great sign for the economy, JMo. He went on CNBC's Squawk Box, and he said that he expects cargo volume to be down by more than a third next week, compared to last year, and that a number of major American retailers are stopping all shipments from China based on the tariffs. To lay out the law, who's getting hurt by this?

Jason Moser: Maybe the better question is, who isn't getting hurt by this? Because it does seem like something that is going to hurt an awful lot of folks covering the spectrum there. I think, generally speaking, small businesses stand out as ones getting a bit more hurt by this, at least in the near term. They tend to not have the same financial resources and are a little bit more dependent on imports and whatnot. I think large companies like Walmart, your Costcos of the world, they're able to shoulder the burden more just because of their scale. Now, with that said, I will say Walmart is particularly levered to China, for example. It's estimated that 60-70% of Walmart's globally sourced products actually come from China. Even more noteworthy, I think there is market research that suggests that figure could be closer to 70-80% for merchandise sold in the US so they're not immune, but they have the ability to shoulder that burden. They can handle it and bye their time as all of this tariff stuff plays out. I think ultimately that really points to the biggest question mark in regard to all of this is just when is this going to ultimately be resolved? And that is still just very unclear, but there's just no question, small businesses are going to feel the brunt of this very quickly.

Ricky Mulvey: Well, I think there will at least be an inflection point when these decreased shiploads lead to empty shelves in physical stores and on online stores like Amazon. I've noticed that these looming tariffs have absolutely impacted my shopping habits. Are you doing any pre tariff shopping in the Moser household right now?

Jason Moser: I have not yet, but it is still early. Now, when I start seeing Chewy telling me that our dog and cat food is out of stock and that shipment's not coming, then I know I've got serious problems because I have three dogs and a cat that won't stand for that, and I can't explain it to him either. But as of now, listen, I've got a garage full of toilet paper and paper towels so I think we at least have the necessities for now.

Ricky Mulvey: You've got a big yard, and you just might need to learn how to hunt in order to provide for your dogs. I've noticed it over here, I just bought a set of AirPods because I'm like, Oh, these are made in China and better get them while I can, first of all, get them and while they're on sale. I've been stocking up on clothes just because I don't know what's going to happen to the shelves. I don't know if my size is going to be impacted, but yeah, it's absolutely impacted my shopping habits, Apollo's chief economist Torsten Slok released a presentation earlier this month, and he laid out a timeline for tariffs, and there's a slide with the spicy title for a PowerPoint slide, the voluntary trade reset recession. Points out early mid May, that's when you start seeing those containerships come to a stop. Then in mid to late May, that's when trucking demand also comes to a halt a fewer trucks are taking things off containerships. Then right in that late May, early June window, that's when you're going to see empty shelves and companies responding to lower sales. What do you think about that timeline?

Jason Moser: I think it's certainly a potential outcome in theory. Now, if that happens, I think there will be massive political consequences. We have to look at this and say well, This is self inflicted. We started this, and it's a matter of trying to figure out, ultimately what the goal is here, and I think that is still unclear, and we're operating just on this day to day headline economy, so to speak. My hope is that this is a worst case scenario and that cooler heads prevail sooner rather than later. But listen, we're just getting ready to start May here, very soon so that's not far off and if that happens, clearly, the consumer will have their say.

Ricky Mulvey: Let's take a look at PayPal reported this morning, and JMo is an investor in this company. I'm pretty happy to own a company that's not making big moves on earnings right now. I'll take some stability that seems to be what PayPal is offering, revenue up 2% on a currency neutral basis. Transaction margin dollars, which is just direct transaction revenue minus transaction expenses. Think things like payment processing, and PayPal likes that is a core measure of its profitability. That was up 7% to about $3.7 billion. Free cash flow, and adjusted free cash flow, both down from last year by about 45% in a quarter respectively. There's some cash flow questions, some operating profitability targets happening. What are your big takeaways from the quarter?

Jason Moser: Yeah, I think it was an OK quarter. It was right in that meaty part of the curve, as George Costanza might say. Not showing off, not falling behind. It was their fifth consecutive quarter of profitable growth, which I think is really encouraging for Alex Chriss. As you mentioned, revenue growth was really non existent, but I wouldn't really look into that as much. I think what we're seeing with PayPal, they're doing a very good job of bringing things down to the bottom line. We saw GAAP earnings per share, up 56%, non GAP earnings per share, up 23%, and really just flew past the guidance that they offered from a quarter ago. I think when you look at the metrics that really matter for the business, things like total payment volume that was up 3%. $417 billion going through those networks there. This is up 4% currency neutral, payment transactions and payment transactions per active account saw a little bit of a decrease, but that's in regard to the payment service provider part of PayPal so, ultimately, those numbers actually excluding that payment service provider part of the business were up as well, and active accounts grew 2% to 436 million.

Remember, they went through just a period not too long ago of trying to call a lot of those inactive accounts that really aren't using the service, so to speak. But returned 1.5 billion dollar to shareholders with share repurchases, which I think was very encouraging. In regard to cash flow, I think the one thing with cash flow with PayPal, it's going to ebb and flow a little bit, particularly because of the buy now pay later side of the business, that fell a little bit, just because of some timing stuff between originating some European buy now pay later receivables and then the ultimate sale of those receivables so I wouldn't read too much into that. This is still a business that generates a ton of cash.

The one thing that stood out to me, though in the quarter that I just can't help but wonder what the future holds for this, because PayPal is building out this little ads part of the business right now, PayPal ads, and they're making some progress. I don't know is this a sneaky ad play? It could be, they're starting to introduce programmatic advertising, and they're starting to launch offsite ads, which ultimately those are ads that are generated from all of this data that PayPal and Venmo and those properties get. that's the beauty of this company. They generate a ton of data because of the consumers that use these services so it reminds me a little bit of Amazon back in the day. If you remember with Amazon, several years back, we knew they were getting into advertising, but didn't really know if it was going to be anything material so it was starting from nothing. But you fast forward to today, Amazon is generating they're on a $70 billion run rate for their advertising business alone. Now, I'm not saying that PayPal could get to that scale. But I do think PayPal could get to meaningful scale relative to its business, and that is very high margin revenue. I think that's going to be something fun to follow with this company as time goes on, particularly as they're launching this offsite advertising business.

Ricky Mulvey: I think one of my big questions then for PayPal's future is the buy now pay later initiative. You see here, Alex Chriss, touting the growth in that in that people are when they use buy now pay later, they're making more transactions. But if we're skidding into a self induced recession, there may be consequences for that, and on a personal level, I'm not super thrilled about buy now pay later. I understand it's part of the business. But speaking strictly as an investor is a growth lever. If you're looking at the growth in that and you're also seeing credit card delinquencies going up, maybe that's not a great thing for that part of PayPal's business.

Jason Moser: I think that's a very valid point. Buy now pay later is just credit card ultimately in another form and you have to count on the fact that some of those loans, so to speak, are not going to pan out, and they're going to write off delinquencies and non payments there. We are seeing consumers relying more and more on buy now pay later for. Buy now pay later, it's a clever product for things that maybe aren't necessities, but when you start seeing data that shows consumers are using buy now pay later for things like their groceries, that's where you start wondering what is the real condition or what is the real state of the consumer? And when you see consumers resorting to BNPL for necessities like groceries, that starts to raise at least some yellow flags in the near term.

Ricky Mulvey: What do you think about CEO Alex Chriss reaffirming the full year guidance? We talked about the macro pressures that will have an impact on this company. A lot of PayPal transactions are consumer spending. If you're in the office of the CEO, what are you telling him? Are you telling him to pool lower guidance? What's going on with that?

Jason Moser: I wouldn't tell him to pull guidance necessarily. I think that what we've seen with Chriss over the couple of years that he's been with the company at this point, he seems to at least like to underpromise and overdeliver I like that. Now, some people will call that sandbagging. I don't care, whatever you want to call it, it's fine on me. But he sets the bar fairly reasonably so he's not setting these super high aspirations, and we know how that works. You set the bar high, eventually, you miss it, and the market really punishes you. But if you set the bar just not low, but just right there in that mid range, that goldilocks range you can hit those targets, you can continue to grow at modest rates, and you're not disappointing the market in the near term. You're not really thrilling everybody in the near term either, but at least you're able to hit those targets and keep on moving the business in the direction that you intend. I don't mind them maintaining that guidance because it does seem like they are offering relatively modest expectations. But as we know, and we're seeing as the headlines change day to day, things can materialize very quickly so it'll be something to keep an eye on for sure.

Ricky Mulvey: Let's go to Spotify real quick. Monthly active users growing 10% for the company. Premium subs grew 12%, but the analysts did not like the user growth projections. That's why the stock is getting punished a little bit. CEO Daniel Ek quickly on the conference call saying we could be impacted by tariffs, but people still want to be entertained. They want to learn stuff they want to listen to music. Before we get into the meat of this conversation, JMo, we have a content partnership with Spotify. The Motley Fool actively recommends the stock, I own the stock. How's that for bias? I also want their algorithm to promote this podcast, as well. I'm speaking from a pretty biased perspective but still, in my view, a pretty strong company when you're looking into the actual business results, anything there stand out to you from Spotify's quarter.

Jason Moser: The stock has been on a heck of a run here recently so a little pullback is understandable. There was a bit of a miss on operating income there, and that was due to what they were calling social charge, what they call social charges, which are ultimately payroll taxes associated with employees salaries and benefits in other countries. But to me, this is still just such a strong business. You see the growth in the users, whether it's premium or ad supported. It's amazing to see what this business has become, and it's evolving so far beyond being like a music streaming app. I think that when you consider that you consider the fact that Spotify has such strong market share in the entertainment industry at large, to me I understand there are some macro concerns there in the near term, but I think when you look at it, at the end of the day, Spotify and things like Netflix, those are the subscriptions that consumers will probably cut last. The value-focused consumer is looking for value and understanding what are they getting for their dollar. That monthly charge for Spotify or for something like Netflix, given how much we all use those, they, I think, give this company a resiliency that probably more don't have.

Ricky Mulvey: We'll leave it there. Jason Moser, thanks for being here. Appreciate your time and your insight.

Jason Moser: Thank you.

Ricky Mulvey: Hey, it's Ricky, and I want to shout out another podcast called Radical Candor. Based on the New York Times best selling book, Radical Candor talks about how to be a great boss without losing your humanity. Kim Scott, Amy Sandler and Jason Rozov deliver actionable insights each week to help you improve your career and relationships. They have other business experts, including Guy Kawasaki and Steven Covery to stop in and share how they use Radical Candor concepts and their work. Their guidance will help you move beyond ineffective flattery and brutal criticism toward guidance that drives real growth and development. Listen every Wednesday for new episodes wherever you get your podcasts and see how you can apply Radical Candor in your life.

Are you feeling a little concentrated? Up next, Robert Brokamp joins me to discuss some ways to diversify your portfolio. This year has been a reminder that stocks can be volatile. In 2023 and 2024, investors were treated to 20% plus returns in the S&P 500. This year, both the NASDAQ and the Russell 2000 were in bear market territory, and the S&P 500 got pretty close. That's if we define a bear market is a drop of 20% or more from all time highs. A drop that in and of itself is the cost of doing business in the stock market, even if the reason this time is, well, you can decide for yourself. Still, it's a good time to ask some questions. If you're near retirement, are you too concentrated in tech stocks? This is a question that even indexers should ask since about one-third of the S&P 500's market value lies in just seven companies. Should I follow the lead of institutional investors spreading their bets outside of the United States, or even Berkshire Hathaway, which now has the most cash on the books of any company Bro ever? All of this is to say, how can I diversify my portfolio to take some of the bite out of bear markets?

Robert Brokamp: Well, there are plenty of investments that may add some balls to your portfolio, and we're going to talk about the most popular candidates. But I first want to talk a little bit about diversification in general. We're going to talk about what diversifies a portfolio for what I see as the typical Motley Fool investor who owns stocks primarily in the S&P 500, which, as you mentioned, Ricky, has a tilt toward growth leaning tech-oriented, tech adjacent companies, and a lot of our listeners also own those companies outright. That's the starting point here. I do want to emphasize that diversification is somewhat of a double-edged sword. You often have to own a diversifying asset through many stretches of, frankly, pretty mediocre ho-hum performance in order to eventually get the payoff. Then as I talk about these various things, I do think it's important that when you're looking for a diversifier, it's helpful to know how they perform basically during past market downturns, and over the last 25 years, there's been a good range of examples to see how investments perform during different types of bear markets. We had longer ones such as the dotcom crash and the Great Recession of 2007-2009. Market dropped more than 50% then. I took more than five years for the market to recover. But then we've also had shorter ones like the pandemic panick and 2022. With all that said, here are some diversifiers to consider, and I'm going to give each a letter grade.

Ricky Mulvey: What's the grade then for the dividend payers?

Robert Brokamp: I'm going to give dividend payers A, B, and here I'm talking about a diversified mix of companies that have paid a consistent and growing dividend for many years, and many have an above average yield. With the current yield on the S&P 500 being 1.3%, it doesn't take much to have an above average yield. It's not necessarily the dividends themselves that make these good diversifiers, though, getting a reliable stream of income is nice, especially since historically that stream will outpace inflation, it's that these types of companies tend to be more value-oriented, a little less volatile than the overall market, and score high on other factors such as quality, which is dined by different people in different ways. But basically comes down to a company that is profitable. The earnings growth is less volatile and they have a strong balance sheet, meaning not a lot of debt. I recently looked at the returns of the 10 biggest dividend focus ETFs, and they're all down this year, but not as much as the overall market. In 2022, when the S&P 500 was down almost 20%, NASDAQ was down more than 30%. The losses in these ETFs were in the single digits, and a couple actually made money. That's it. The diversification among dividend payers is important. During the Great Recession, some of the best dividend payers were financial stocks, and they got walloped. You definitely want a diversified portfolio of dividend payers.

Ricky Mulvey: Our colleagues, Matt Argersinger and Anthony Shavon, who run our dividend investing in service would also tell you that dividends are great for companies to pay because they make them a little bit more disciplined on capital allocation decisions when they're not maybe pursuing growth at all costs, and they have to return a little something to their shareholders. Another idea, international stocks, getting outside the United States. Bro, how are you feeling about these? What's the grade right now?

Robert Brokamp: I'm going to give them a C plus, which doesn't sound great, though, I think most people should have a little bit of international exposure. I'm giving them a C plus because, frankly, over the past 15 years, it's been tough to argue for international stocks. US stocks have outperformed them by some measure, it's a historical amount. But looking longer-term, there are many long-term periods, several years, even a decade or more, when international stocks outperform US stocks. You could saw it in parts of the '70s, the '80s, and the early 2000s, and looking very short-term, the total non-US stock market is actually up 8% so far this year, while US stocks are down, developed market stocks are doing even better, returning almost 11%. I do think there's something special about the American economy, and it explains why US stocks have outperformed the vast majority of other national stock markets over the last century or so, which is why I'm giving international stocks a C plus when it comes to diversification. But there's no question that there are long stretches when international stocks will do well, and they're certainly a lot cheaper these days than US stocks when you look at P/E or dividend yield or anything like that, which is why I personally have between 15 and 20% of my portfolio overseas.

Ricky Mulvey: The next one is a big one. We could be talking multifamily REITs, rental properties, office buildings. We could be talking about the Vanguard entire real estate index fund, but I'll make it easy for you, Bro. How are you feeling about real estate?

Robert Brokamp: As you hinted at, there are all real estate, so I'm going to give it a range of grades from C plus to B plus, depending on the type of real estate. A few weeks ago, we did an episode on what happens to different types of assets during a recession. We cited research which actually found that home prices actually hold up well. In fact, they tend to do better during bear markets and stocks than during bull markets with the very notable exception, of course, a 2007-2009 recession when both the economy, the stock market, and home prices collapsed. But usually, over the long-term, residential real estate, whether it's your own home or perhaps investing in rentals, can provide some excellent diversification. Now, you hinted at REITs, real estate investment trust. These are stocks and companies that own and operate real estate. It can be all real estate: apartment buildings, medical facilities, office facilities, storage, and they can be a good portfolio diversifier as well, though, like international stocks, man, they have lagged the S&P 500 for a good while now. Their diversification benefits can be mixed. They did very well during the dotcom crash and the ensuing recession, but also they were part of the real estate bubble, and boy, they got pummeled in 2008. As a starting point, I think it makes sense to have maybe a 5% allocation to REITs, and you can use that Vanguard ETF that you suggested. That's what I choose, especially if you're close to in retirement since they have above average yields, but they're still moderately to highly correlated to the overall stock market, so the diversification benefits are going to be mixed.

Ricky Mulvey: This next one has been on a run. Two investments over the past 12 months. One of these has returned about 7%. The one that I'm talking about now has returned 42%. Bro, this is the comparison between what the S&P 500 has done over the past year and gold.

Robert Brokamp: It's been quite remarkable. I'm going to give gold a diversifying grade of C plus, though I could easily be moved to a B minus on this. Gold has been in the news a lot lately because, as you pointed out, the return has been exceptional. It's up 26% so far this year, based on the performance of the SPDR Gold Shares ETF, and as you may have seen on social media, it's actually returned about the same as the S&P 500 over the past 20 years, almost identical. Why am I giving it a C plus? Well, first of all, part of it is just philosophical. We at the full believe in owning businesses with products, services, innovations, they generate a growing stream of cash. Gold, on the other hand, just a piece of metal, pass some decorative industrial uses, but mostly you're just betting that someone will be willing to pay a higher price for it in the future, not because it's going to be generating more cash in the future, but you're just hoping that there'll be more demand. Gold has gone through some really long stretches of lousy performance. It did really well in the 1970s due to the high inflation, peaked in 1980, went the other direction, and it took around 25 years to get back to its 1980 peak. All that said, it is true that gold has done well during bear market in stocks. We're seeing that this year, saw in 2022, 2008, and in two of the three bad years during the dotcom crash. It's fine to own some Gold as a hedge against bear markets, which is why I own little myself. I own some of that SPDR Gold Shares ETF.

Ricky Mulvey: By the time you notice it's outperforming, maybe that means you're a little late to the party on gold, Bro? It is you're betting on someone to pay more for it than you are today. However, gold has been around for thousands of years that people have been accepting it is a store of value. A little bit more of a track record there than something like crypto or even the tulip bulbs I was trying to sell you before we were recording. Let's get to crypto, because this is one that is interesting, and some investors still see it as a store of value. Let's talk for hours about Bitcoin as a digital gold in this economy we live in.

Robert Brokamp: We could talk for hours. In terms of a grade, I'm giving this one incomplete. I'm going back to my teaching days. I just feel like I can't give it a grade right now because it's just too soon to say what diversification benefit you're going to get from crypto. We'll talk mostly about Bitcoin, but as you know, there's so many varieties of it. It just doesn't have a long enough history for me. Bitcoin is flat for the year, which means it's doing better than in the stock market, so that's good news. But in 2022, it plummeted more than 60%. For me, the jury's still out. There's no question that it is gaining wider adoption, both in terms of by investors, by countries, and it's boosted by the availability of ETFs to make it easier to invest. I'm more comfortable investing in it than I would have been maybe three or four years ago. But the value of it as a diversifier is pretty much still unproven.

Ricky Mulvey: How about as a strategic reserve? Moving on. Let's get to alternatives, however you define them.

Robert Brokamp: This is a very broad category that can include really all investments that aren't commonly held by everyday investors. We're talking commodities, managed futures, currencies, hedge funds, private equity, and so on. For the most part, it's difficult or expensive for the regular investor to buy into these types of investments, and you're often not getting the cream of the crop. You're getting what's left over. Depending on how you invest in them, they keep illiquid and/or endure really long periods of bad or at least mediocre performance. For most people, I don't think they're necessary. However, I will add that the proponents of these types of investments do make some good points. Primarily, they say that a standard portfolio of stocks and bonds isn't as diversified as some people think because they often rely on a single factor like the overall economy or maybe just the movement of interest rates. We saw that in 2022 when interest rates skyrocketed and stocks and bonds fell. If you have the time and the inclination to research more about alternatives, you actually might find some things that strike your fancy. Just be prepared to pay higher fees to hold on to something that will behave very differently from a standard portfolio, which, I guess is the whole point.

Ricky Mulvey: The next one is Uncle Warren's one of his favorites right now, and that is just cash, Bro.

Robert Brokamp: Cash is boring, but I'm going to give it at an A, front of the class. I won't belabor this, cash is king or queen when times get tough. It's the only investment that you can feel reasonably sure won't drop in value. Just make sure you're putting in the effort to get the highest yields possible, which these days is close to or around 4%, and you're going to have to accept the fact that returns will never be great. When you invest in cash, you're making a trade-off. You're choosing lower return certainty over the unpredictable possibility, and you can even say historical probability that you'd earn a higher return in stocks given enough time. But for money you need in the next few years that you want to make sure holds up in value, it's hard to beat cash.

Ricky Mulvey: Another way you can take your money out of the stock market is to put it in bonds. Bro, there are some higher-yielding bond funds that look pretty attractive to me.

Robert Brokamp: This is why I'm giving this a range of grades, actually, from C minus to A. Because when it comes to bonds, the returns will depend on the issuer, the duration, meaning short or long-term, shorter-term bonds are going to be less volatile, longer-terms are much more volatile and how you own them, individual bonds versus bond funds. But let's start with the safest and move on to the riskiest. US treasuries are considered very safe, maybe not as safe as they were like five years ago, Fitch and S&P have downgraded them, and Moody's made some announcement recently about they might be doing some things as well, but they're still considered the safest investments in the world. Investment grade corporates are considered safe. Not super safe, but safe. Then you have below investment grade corporates, otherwise known as junk, and they're very risky. This is where you get the higher yields. You'll get much higher yields from junk bonds and somewhat higher yields from corporates, but you got to understand that they will often go down during recessions, and junk bonds really go down.

I'm going to talk about 20% or more during the tough times. Bonds are holding up pretty well this year, by the way, returning around 3%, but they've been disappointing over the past several years. In fact, it's really been one of the worst stretches for bonds in US history. I would say the future looks brighter, but if you want more certainty from bonds, explore investing in individual bonds because you know exactly how much interest you're going to get. How much you're going to get back when the bond matures at maturity date, assuming the issuer is still in business, of course. I would also explore what are known as either target date bond funds or defined maturity bond funds. These only owned bonds that mature in the same year. That way you have a little bit more certainty about what they'll be worth when that year arrives. The two biggest issuers of these ETFs are iShares and Invesco.

Ricky Mulvey: Bro, junk bonds are how I started my casino chain. Let's wrap it up with annuities.

Robert Brokamp: Yes, annuities. Not everyone's favorite topic, but let me explain. I'm going to give these an A for the right people. When I mean annuity, I'm saying anything that sends you a regular check in retirement for the rest of your life. In the original versions of annuities, you'd get that check or that payment every year. You'd get it annually, which is why they're called annuities. We all get some of this. By this, I'm talking about Social Security. Yes, Social Security is in trouble. People in their 50s and younger may not get everything they're promised, but you'll get most of what you're promised, and you'll get that check every month, regardless of what's happening in the stock and bond markets, it adjusts for inflation. It's partially tax-free. I think if you can maximize your Social Security benefit to some degree, that is a great diversifier in retirement. Same principle if you're getting a defined benefit pension, the traditional pension. If you can maximize that, that's good. Now, you can buy more, actually buying annuity from an insurance company. But the only annuity that appeals to me personally it's called a single premium Immediate annuity. You hand over a lump sum, say, $100,000, and you'll get $68,000 a year for the rest of your life. You give up a lot of liquidity, so don't do it without understanding the loss of liquidity when you do that. If you choose to go that way, you take that money from the portion of your portfolio that would otherwise have been taken from the bond part of your portfolio.

Ricky Mulvey: Very good. Robert Brokamp, appreciate being here. Thanks for your time and insight.

Robert Brokamp: My pleasure, Ricky.

Ricky Mulvey: As always, people on the program may have interests in the stocks they talk about in the Motley Fool may have formal recommendations for or against, don't buy or sell stocks based solely on what you hear. All personal finance content follows Motley Fool editorial standards and are not approved by advertisers. The Motley Fool only picks products that would personally recommend to friends like you. I'm Ricky Mulvey. Thanks for listening. We'll be back tomorrow.

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Jason Moser has positions in Amazon and PayPal. Ricky Mulvey has positions in Chewy, Netflix, PayPal, and Spotify Technology. Robert Brokamp has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Berkshire Hathaway, Bitcoin, Chewy, Costco Wholesale, Moody's, Netflix, PayPal, Spotify Technology, and Walmart. The Motley Fool recommends the following options: long January 2027 $42.50 calls on PayPal and short June 2025 $77.50 calls on PayPal. The Motley Fool has a disclosure policy.

Recession-Resistant Stocks: What Stocks Should Hold Up Best During a Recession?

The risk has been increasing that the United States will have a recession in 2025 or within the next year, according to top Wall Street firms and economists. Recession risk has risen sharply over the last few months, largely due to the trade war and the potential for tariffs to hurt U.S. (and global) economic growth and ignite inflation.

Below I'll explore the current probability of a near-term recession and what stocks could hold up best during the next recession.

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What's the probability of a near-term recession in the United States?

Many of the probability estimates from experts that the U.S. will have a recession in 2025 or within one year fall within the 40% to 60% range, though there are some credible sources with estimates that are lower and higher. In early April, Wall Street company Goldman Sachs boosted its one-year recession-risk probability to 45% from 35%, which it had previously increased from 20% in late March.

Also in early April, JPMorgan pegged the odds of a U.S. recession in 2025 at 60%, up from its early March forecast of 40%. In mid-April, the investment bank reiterated its 60% probability. It said that President Donald Trump's 90-day pause on his April 2 country-specific so-called reciprocal tariffs "reduces the shock to the global trading order, but the remaining universal 10% tariff is still a material threat to growth, and the 145% tariff on China keeps the probability of a recession at 60%."

Which categories of stocks should hold up best during the next recession?

Certain categories of stocks tend to perform better than others during economic downturns. These mostly include what are called "defensive stocks" that tend to pay dividends.

Defensive stocks include several broad classes, including:

  • Stocks of companies that make products or provide services that people need no matter the economic climate.
  • Gold and silver mining stocks. Precious metals are considered hedges on inflation and the relative value of the U.S. dollar, which generally weakens during recessions.

Examples of the first group listed above include:

  • Consumer staples: Food and beverage makers, personal and home care products manufacturers.
  • Utilities: Water, electric, and gas utilities.
  • Healthcare: Pharmaceutical makers, medical-device makers.
  • Discount retailers: In tough economic times, many consumers tend to be more price-conscious.

There are other types of stocks that tend to weather recessions well. You can think of one group as "small indulgence stocks."

During economic downturns, many people will feel uncertain about their job security. As a result, they'll put off large expenditures, such as homes and new vehicles, and cut back their spending on discretionary items, such as clothing.

However, many folks will keep spending on what they consider relatively inexpensive "treats." Some might even increase their spending on such products or services to reward themselves for putting off spending on big-ticket items.

Examples of "small indulgence" products and services include relatively inexpensive:

  • Entertainment, such as video-streaming
  • Comfort foods (such as chocolates), meals out (fast-food restaurants)

What stocks gained or held up relatively well during the Great Recession?

All recessions are somewhat different, so it's not possible to say that just because select stocks held up well during prior recessions, they'll hold up well in future ones. That said, in general, certain types of stocks tend to perform better than others during tough economic climates, as discussed above, so investors can learn valuable lessons by looking at past recessions.

The Great Recession was a deep economic downturn that officially lasted for 18 months from Dec. 2007 through the end of May 2009. It's widely considered the most severe U.S. economic downturn since the Great Depression, which began following the stock market crash in 1929 and didn't end until the start of World War II in 1940.

During the one-and-a-half years of the Great Recession, the S&P 500 index, including dividends, plunged 35.6%.

Table 1: Stocks that gained during the Great Recession

These stocks and one exchange-traded fund (ETF) are listed in order of descending performance during the Great Recession. This list isn't all-inclusive.

Company Market Cap Dividend Yield Wall Street's Projected 5-Year Annualized EPS Growth Return During Great Recession Return From Start of Great Recession to Present*
Netflix (NASDAQ: NFLX) $469 billion -- 23.6% 70.7% 33,280%
iShares Gold Trust ETF $41.9 billion net assets -- -- 24.3% 302%
J&J Snack Foods $2.5 billion 2.4% 9.1% 18.1% 404%
Walmart $762 billion 1% 9.5% 7.3% 761%
McDonald's $226 billion 2.2% 7.6% 4.7% 778%
S&P 500 index -- 1.36% -- (35.6%) 424%

Data sources: Yahoo! Finance, finviz.com and YCharts. Data to Friday, April 25, 2025. EPS = earnings per share. *Bold-faced returns = stock has beaten the S&P 500.

  • Netflix: Video-streaming pioneer that's the world's leading video-streaming company.
  • iShares Gold Trust ETF: Exchange-traded fund that aims to track the price of gold.
  • J&J Snack Foods: Produces niche snack foods and frozen beverages.
  • Walmart: World's largest retailer by revenue, focuses on low prices.
  • McDonald's: World's largest fast-food restaurant chain by revenue.

Table 2: Stocks that held up relatively well during the Great Recession

The following stocks declined during the Great Recession but held up much better than the broader market, which dropped nearly 36%. This list isn't all-inclusive.

Company Market Cap Dividend Yield Wall Street's Projected 5-Year Annualized EPS Growth Return During Great Recession Return From Start of Great Recession to Present*

Newmont

$60.8 billion 1.8% 7.2% (0.3%) 54.5%
Hershey (NYSE: HSY) $33.1 billion 3.4% (7.4%) (7.2%) 524%
Church & Dwight (NYSE: CHD) $24.4 billion 1.2% 7.4% (9.6%) 792%
American Water Works (NYSE: AWK) $28.1 billion 2.1% 6.5% (12.7%)* 953%
NextEra Energy (NYSE: NEE) $136 billion 3.4% 8.2% (15.7%) 531%
S&P 500 index -- 1.36% -- (35.6%) 424%

Data sources: Yahoo! Finance, finviz.com, and YCharts. Data to Friday, April 25, 2025. EPS = earnings per share. *Bold-faced returns = stock has beaten the S&P 500. **Company went public in April 2008, a few months after the recession started.

  • Newmont: World's largest gold mining company, which also mines other metals.
  • Hershey: Largest chocolate company in the U.S. by market share, also sells salty snack foods.
  • Church & Dwight: Home and personal-care product maker, best known for its iconic Arm and Hammer brand baking soda.
  • American Water Works: The largest and most geographically diverse regulated U.S. water and wastewater utility.
  • NextEra Energy: Largest electric utility in the U.S. by market cap and the world's largest generator of renewable energy from wind and sun.

Key takeaways from the above 2 tables

1. Gold mining stocks (Newmont, Table 2) and gold ETFs (iShares Gold Trust ETF, Table 1) might hold up well or even make strong gains during tough economic climates, but they rarely perform well during booming economic times. Therefore, they tend to underperform the market over the long term. These investments are highly volatile and cyclical and best left to short-term traders.

2. Netflix and Hershey are good examples of "small indulgence stocks," as described above. Moreover, Netflix has an added benefit that wasn't an issue during the Great Recession: It should be little affected by the raging tariff war, as U.S tariffs on imports and other countries' retaliatory tariffs are on goods, not services. This is an important distinction that investors should keep in mind when selecting stocks.

3. Top utility stocks can outperform the market over the long term, despite conventional wisdom to the contrary. (Cases in point: American Water Works and NextEra Energy, Table 2.) These stocks aren't just "widow and orphan stocks," as stockbrokers, in general, have long characterized them. A statistic that might surprise many investors: As of April 25, shares of Google parent Alphabet have performed only slightly better than shares of American Water since the latter's initial public offering (IPO) 17 years ago in April 2008: GOOGL has returned 1,090% to AWK's 953%.

4. There are some top-performing stocks that get very little coverage in the financial press. (Case in point: Church & Dwight, Table 2). One takeaway here is that investors shouldn't conflate the amount of coverage a stock gets in the financial press with its desirability as an investment, especially a long-term investment.

Review your stock holdings -- but stay in the market

As noted in this article's opening, top Wall Street banks and economists generally give odds ranging from 40% to 60% that the U.S. will have a recession in 2025 or within the next year. These are quite high odds, so it makes sense that investors review their stock portfolio and perhaps tweak it to make it more recession-resistant.

That said, if you're a long-term investor, it's not a good idea to get out of the stock market entirely or make huge changes, such as selling all of your growth stocks. It's extremely difficult to time the market. If you sell your growth stocks that don't tend to do well during recessions (such as tech stocks), you'll risk missing the early stages of their upturns during the next bull market -- and the early stages of a sustained upturn tend to be strong.

Time is a long-term investor's friend. Over the long term, the direction of the U.S. stock market has been decisively up. The longer your investing time frame, the less concerned you need to be about recessions causing market downturns.

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. JPMorgan Chase is an advertising partner of Motley Fool Money. Beth McKenna has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Goldman Sachs Group, Hershey, JPMorgan Chase, Netflix, NextEra Energy, and Walmart. The Motley Fool has a disclosure policy.

Is Netflix the Perfect Recession Stock?

Netflix (NASDAQ: NFLX) has changed the media landscape, not once but twice. First it altered the way consumers rented DVDs and then it basically helped to create the streaming business. Both times it used a subscription model. And that model is what makes this company so resilient during economic downturns. It could be the perfect recession stock, but does that make it worth buying today?

What does Netflix do?

Netflix basically provides the software platform through which consumers can stream media. It charges monthly fees to consumers for the use of the platform. The subscription revenue it generates is used to pay for the content that Netflix offers on its service. In the early days, the company was busy building its software offering and spent heavily on content to attract consumers. But it has now gained enough scale that it is a sustainably profitable business.

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Two people comparing charts with a calculator and computer on a table.

Image source: Getty Images.

The subscriptions are annuity-like income streams. The key here is that a monthly subscription to Netflix is fairly low cost relative to what it would cost to go out to see a movie in a theater. And that's true for just for a single person, the benefit gets even greater for couples and greater still for couples with children. And since Netflix can be used on multiple types of devices, the service can, essentially, travel with a customer. There are a lot of positives here and very few negatives.

Which is why recessions aren't that big a deal for Netflix's business. While consumers may pull back on going to the movies, or other out-of-home entertainment, they probably aren't going to cut off Netflix unless they have no other choice.

The company sailed through the brief recession during the coronavirus pandemic period. But the bigger test was the Great Recession, where revenue didn't skip a beat despite the length and depth of the economic downturn. If history is any guide, the next recession shouldn't be too much of a headwind for the company, either.

Is Netflix worth buying now that economic uncertainty is high?

The key words above are "too much of a headwind." That's because Netflix was still in an early stage of growth during the Great Recession. It has reached a far more mature state today, so there's a chance that a recession will have a bigger impact on the top line. Given the nature of its media business, however, it seems highly unlikely that Netflix's sales and earnings will suddenly plunge.

This dynamic was highlighted in the company's first-quarter results. The company's revenue was ahead of its guidance, which is a very good sign. But management refrained from updating its full-year guidance. That suggests that the company is worried that the strong first quarter will be offset by weaker quarters later in the year.

That's hardly the end of the world, however, and is probably a prudent decision given the economic uncertainty. Netflix is still likely to be a strong performer even if there is a recession. The problem isn't the company's business, it is the stock's valuation. The stock's price-to-sales, price-to-earnings, and price-to-book value ratios are all above their five-year averages. This suggests the stock is expensive, noting that the shares are trading near their all-time highs.

To paraphrase famed value investor Benjamin Graham, even a good stock can be a bad investment if you pay too much for it. And it looks like investors are paying a high price for the perceived safety of Netflix's streaming business.

Netflix's business is resilient, but it stock may not be

If you are looking for an investment that will survive a recession in relative stride, Netflix's business seems highly likely to do just that. However, it is unclear what will happen to the stock, which appears to be pricing in a lot of good news. And given that management is taking a cautious stance with its full-year 2025 guidance, it probably makes sense for investors to take a cautious stance with the company's richly valued stock.

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Before you buy stock in Netflix, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Netflix wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $591,533!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $652,319!*

Now, it’s worth noting Stock Advisor’s total average return is 859% — a market-crushing outperformance compared to 158% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of April 21, 2025

Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Netflix. The Motley Fool has a disclosure policy.

1 Monster Stock That Turned $10,000 Into $6 Million in 20 Years

Let's face it: Investors put money to work in the stock market with a single core goal -- to achieve strong returns and grow those funds. And over the long term, a diversified portfolio can certainly do just that. Over the past two decades, the S&P 500 index has registered a 557% total return. But that is, of course, the average result from a large group of companies. Some have produced drastically better gains.

For example, a $10,000 investment made exactly 20 years ago in one business that has since become an industry leader would be worth more than $6 million (as of April 22). That monster gain would be life-changing wealth for any patient investor who was bold (and lucky) enough to bet on that then-unproven company and hold on through good times and bad along the way.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Learn More »

That amazing business was none other than Netflix (NASDAQ: NFLX). But should you buy it today?

Press play

When it comes to disruption and innovation, few companies fall into the same elite category as this one. Netflix's success over the years has been truly exceptional.

When Netflix was young, traditional cable TV was the primary medium by which households watched their favorite shows and movies. However, the growth of high-speed internet access provided the DVD-rental-by-mail company with the technological infrastructure to bring streaming video entertainment to the masses. Netflix launched its streaming service in the U.S. in 2007, and today, it operates in 190 countries.

Netflix easily won over customers by providing a superior experience. People could choose to watch whatever they wanted from a large and growing content catalog whenever they wanted to watch it, all for a monthly fee that was much cheaper than a basic cable subscription. This helped drive rapid adoption. Between the end of 2014 and the end of 2024, the company increased its paid subscriber base by 459% and its revenue by 609%.

A dominant force

It would be hard to overstate just how much of a media powerhouse Netflix has become. More than 300 million households pay for its subscriptions, and management says it reaches a whopping 700 million people. It's on pace to rake in $44 billion in revenue in 2025.

From a financial perspective, Netflix has reached a level of profitability that its early critics probably never thought was possible. Credit goes to the company's massive scale. Keeping the new content pipeline full is expensive, but those costs are (relatively speaking) fixed -- it won't cost the company incrementally more to show the new season of Stranger Things to a larger audience, for example. Netflix plans to lay out $18 billion this year on new shows and films, but it has huge user and revenue bases to amortize that spending against.

The result is a lucrative business model. Netflix executives forecast an operating margin of 29% for 2025. That would be up drastically from 18% in 2020, showcasing the company's ability to scale up profitably. The business reported $6.9 billion in free cash flow last year -- most of which it used to repurchase $6.2 billion worth of outstanding shares.

Press pause

The stock market is in correction territory right now, but this hasn't fazed Netflix investors. The stock is up 17% this year as of April 22, bucking the S&P 500's 10% decline.

But though Netflix stock has been a tremendous winner in the past, I don't believe it's automatically a buy today. The valuation is what worries me. As of this writing, shares trade at a price-to-earnings ratio of 49.2. That's not a small premium to pay.

I'm totally confident that Netflix will not generate another 60,000% return over the next 20 years. Given its current market cap of around $467 billion, it's just not financially feasible for it to grow to a size 100 times bigger than Apple. My perhaps more controversial view is that it might not even outperform the broader market during that time. The business is poised to continue its solid growth, but its current valuation already has some of the market's high expectations baked in.

Investors who believe Netflix is a quality company worth owning should be patient and wait until there's a better opportunity to add shares at a less lofty valuation. But if you prefer not to wait, consider using a dollar-cost averaging strategy to build your position over time.

Should you invest $1,000 in Netflix right now?

Before you buy stock in Netflix, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Netflix wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $591,533!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $652,319!*

Now, it’s worth noting Stock Advisor’s total average return is 859% — a market-crushing outperformance compared to 158% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of April 21, 2025

Neil Patel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple and Netflix. The Motley Fool has a disclosure policy.

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